Government is considering reducing or scrapping the Road Accident Fund levy, the R2.27 collected on every litre of petrol and diesel sold. Deputy Transport Minister Mkhuleko Hlengwa told Moneyweb he favours a hybrid model, where the levy is cut but not removed entirely and the fund draws on other sources of money as well. He spoke on the sidelines of the October Transport Month launch, in the same week inland 95 octane petrol rose to a record R30.25 a litre.

"We are collecting R2.27 from the pump, which is adding to the cost of fuel, so we need to look at third-party insurance and private sector participation," Hlengwa said. He confirmed the Department of Transport considers the fuel levy alone an unsustainable way to fund the RAF, and that bringing fuel costs down is part of the government's medium-term development plan.

The alternatives being discussed include compulsory third-party vehicle insurance and travel insurance for foreign visitors. Two related steps are on the table: changing the levy itself, and submitting the Road Accident Benefit Scheme Bill to cabinet and parliament, which would replace open-ended claims with a defined schedule of benefits for crash victims. None of this is decided.

Transport Minister Barbara Creecy told Parliament in July that the department and the RAF had started a formal review of the fund's financing, guided by a business case, and that the outcome would be made public once complete. The pressure on fuel prices is real. Treasury cut the general fuel levy earlier this year to cushion motorists from the oil price spike, a measure that cost an estimated R17 billion in lost revenue and was phased out by July. The RAF levy was left untouched throughout.

Moneyweb's Roy Cokayne reported Hlengwa's comments, along with Outa chief executive Wayne Duvenage's objection that moving away from the fuel levy is not the solution, because the levy is a user-pays system where everyone who drives contributes. IOL covered Creecy's July parliamentary reply confirming the formal funding review. Moneyweb separately reported the October fuel price increase of more than R3 a litre that took inland 95 to its record level.

For any business running vehicles, the important detail is not whether the levy shrinks but what replaces it. Today the RAF is funded per litre, so the cost falls on whoever drives the most: a delivery fleet burning 1,000 litres a month pays R2,270 a month in RAF levy alone.

Third-party insurance is usually priced per vehicle. Move part of the funding there and high-mileage fleets would likely pay less, while low-mileage vehicles that sit in a yard most of the week could pay more. There is also a structural reason the current model is weakening. Electric vehicles burn no fuel, so they contribute nothing to the RAF today, and every electric bakkie or electric truck that replaces a diesel one shrinks the fund's income a little more. A per-vehicle model would capture them.

Duvenage's point stands too: fuel-based funding is simple and hard to dodge, while an insurance scheme needs enforcement on every unregistered and uninsured car on the road. Watch the Road Accident Benefit Scheme Bill, because that is where the real cost of the fund gets decided.

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