The Department of Electricity and Energy wants South Africa’s existing vehicle carbon dioxide levy turned into a “feebate”, a system in which fees on inefficient cars pay for rebates on efficient ones. The idea sits in the department’s draft National Energy Efficiency Strategy (NEES) 2025 to 2035, which is posted on the department’s website. It is a policy direction, not a tax notice: the draft sets no emission bands, no rand amounts and no start date, and it is not a National Treasury or SARS proposal.
What the draft actually says
Objective 3.4.2 of the draft says the existing levy “does not incentivise efficiency across the market.” It says the levy must be restructured into a revenue-neutral feebate system that pays rebates for efficient vehicles with below-standard emissions, funded by levies on inefficient vehicles with above-standard emissions. According to the department, the structure should be transparent, with annual threshold adjustments reflecting the improving fleet average, and should include incentives for new energy vehicles (NEVs) and hybrid technologies.
Revenue-neutral means the system is meant to raise no more than it pays out. That matters for motorists and dealers, because the draft frames the change as a redistribution between inefficient and efficient models rather than a new source of state revenue. Where the thresholds would sit is not stated. BusinessTech and MyBroadband both report that the department has yet to set the standards.
The current levy is set by Treasury and collected through customs and excise
The levy being restructured already exists. A notice signed by the Minister of Finance on 28 March 2024 amended Part 3D of Schedule No. 1 to the Customs and Excise Act with effect from 1 April 2024. It set the rate for most new passenger vehicles at R146 per g/km of CO2 emissions above 95g/km, and R195 per g/km above 175g/km for double cabs. Those are the 2024 figures. We have not confirmed the rates now in force, which may have been adjusted since. Because the levy is written into that customs and excise schedule, a feebate would need a change to the law, which a department’s strategy document cannot make on its own.
Legislation is pencilled in for 2028/29
The draft’s implementation plan says drafting of the feebate legislation falls in Year 3, 2028/29, alongside a decision on utility energy-saving obligations. Even if the strategy is adopted as written, the draft timeline therefore points to legislation being drafted about two years from now, with no indication of when any rebate or levy would apply to a buyer.
The draft carries a version note dated 1 August 2026, describing it as a first full draft. The text of the document states that it seeks Cabinet endorsement. Its cover page is marked “DRAFT: NOT FOR DISTRIBUTION” and “Official Use Only”, although the file is publicly available on the department’s site. We could not read the separate gazette notice on the department’s site, which appears to be an image-only file, so we cannot confirm a public-comment deadline. Anyone planning to respond should check the department’s website.
Fuel economy standards sit beside the feebate
The draft also proposes mandatory fuel-economy standards for light vehicles (Objective 3.4.1). It says the Department of Transport and the Department of Electricity and Energy should jointly commission a feasibility and calibration study, then use its findings to introduce CO2-equivalent standards aligned with international norms. The standards would apply to all new vehicle sales and be tightened every three years based on technology cost analysis, with exemptions for manufacturers. The department’s reasoning is competitiveness: South Africa needs the standards, it says, to avoid being phased out of export markets where fuel-efficiency standards already exist.
That argument ties into the car industry’s export position. Our report on South Africa’s car exports to Europe and the electric shift covers the pressure local plants face.
Other transport measures in the draft
The strategy asks for eco-driving modules in the national driving-licence curriculum and in professional driver certification for heavy vehicle, taxi and bus operators, citing a 15 to 20% influence of driver behaviour on fuel consumption. It also asks the Department of Trade, Industry and Competition (dtic) to revamp automotive manufacturing incentives to accommodate NEV and hybrid production, including local assembly incentives, component development support and preferential government procurement targets.
MyBroadband adds that carmakers have qualified since 1 March 2026 to claim a tax deduction equal to 150% of qualifying investment in NEV production, capped at R500 million of the deductible portion in the first financial year, and that trade minister Parks Tau published draft battery-incentive regulations in May 2026. Those measures are separate from the strategy.
The bigger energy picture
At the strategy level, the draft proposes a national target of about 132 petajoules of avoided final energy demand by 2035 compared with the business-as-usual path, roughly a 5.5% reduction in projected final energy demand. It allocates 43.3 petajoules of that to transport. The department argues that efficiency is one of the fastest and most cost-effective ways to ease strain on generation capacity and lower input costs across the economy.
Not the same as the Road Accident Fund proposal
African Insider points out that the feebate is a different matter from a separate proposal by the Road Accident Fund to raise money through a levy on vehicle registrations or licence renewals. That fund-raising idea, covered in our report on the Road Accident Fund’s proposed licence renewal levy, aims to pay accident-victim compensation, while the feebate aims to steer purchases. African Insider’s report adds that motorists should not read the proposals as an immediate tax increase.
What remains unknown is the important part: the thresholds, the size of any levy or rebate, who would run the scheme and when it might start. For now, importers, dealers and fleet operators have a signal about direction rather than a price. More policy coverage is in Regulatory & Policy.
