South Africa’s Transport Minister Barbara Creecy has announced plans to impose a mandatory fee on car licence disc renewals to address financial instability at the Road Accident Fund (RAF). The decision stems from a widening revenue shortfall driven by the decline in fuel taxes, as hybrid and electric vehicles (EVs) gain popularity without contributing to the fund through petrol and diesel levies.
The RAF, which provides compensation for road accident victims, depends on a levy of R2.25 per litre of fuel, generating between R45 billion and R50 billion annually. Despite this income, the fund remains insolvent due to years of financial mismanagement and costly legal disputes. In a Sunday World Podcast interview, Creecy stated that the existing funding structure cannot sustain the RAF as more drivers switch to EVs, which currently avoid the levy entirely while still qualifying for compensation claims.
To ensure all motorists contribute fairly, the department is evaluating multiple options. One proposal involves introducing a levy on foreign-registered vehicles entering the country. However, the most debated solution is the licence disc fee. If adopted, this would create a second tax burden for owners of combustion-engine vehicles, who already pay the fuel levy, while EV owners would face only the new fee. Creecy’s team has rejected immediate increases to the RAF levy, despite the fund’s annual report recommending raising it from R2.25 to R3.00 per litre, a 33% increase, to counter inflation.
Creecy cited rising fuel costs, partly influenced by global conflicts, as a reason to avoid further straining motorists. Instead, she prioritized addressing internal inefficiencies within the RAF as the primary path to stability. The proposed licence disc fee would represent a significant change in how the fund secures revenue, though its scope, whether universal or targeted at specific vehicle types, remains undetermined. The discussion reflects broader concerns about declining fuel tax income as South Africa’s transportation sector transitions.
Creecy’s stance reflects a global pattern where governments must adapt funding models for road infrastructure and accident compensation as EV adoption reduces traditional fuel tax revenue. The RAF’s financial crisis illustrates the challenges legacy systems face when adapting to rapid technological shifts without legislative updates. Any new fee would require parliamentary approval, and Creecy emphasized that managerial reforms alone cannot resolve the fund’s long-term financial issues.
Revenue Strategies and Policy Challenges for the Road Accident Fund
The RAF’s annual report highlighted that the current levy has fallen behind inflation, contributing to declining revenue despite annual collections of billions. While the fund proposed raising the levy by 75 cents per litre, the department has not pursued this option, instead favoring alternative revenue adjustments. Legislative approval would be required for any new fee structure.
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