RFA's fuel levy hike threatens vehicle affordability
Namibia’s vehicle market is entering a period of renewed cost pressure as proposed adjustments to the country’s road-funding model come into focus, Simonis Storm said in its vehicle sales report for October.
This follows a recent proposition by the Road Fund Administration (RFA) for a significant increase in the fuel levy to N$4.46 per litre - an effective rise of N$2.06 per litre - to close a widening road-maintenance funding gap.
The request, Simonis Storm said, comes at a time when overall ownership costs are already elevated due to high fuel prices, insurance inflation and rising vehicle maintenance costs.
“Economically, the levy increase introduces a clear upward shock to the total cost of vehicle ownership (TCO). For private motorists, this would translate into an additional N$150 to N$300 per month, depending on vehicle type and distance travelled, while high-mileage users such as taxis, couriers and freight operators could incur N$900 to N$1 000 in extra monthly fuel expenses,” Simonis Storm said.
“Over a standard five-year financing period, the cumulative burden is material, ranging from N$9 000 for the average small car to more than N$50 000 for commercial fleets. These costs behave very much like an increase in monthly instalments, tightening already-strained household and business budgets,” it added.
'Rolls-Royce roads'
According to Simonis Storm, concerns around the efficiency of infrastructure spending add another layer to the policy debate. Industry commentators have criticised the development of unnecessarily high-specification projects, so-called “Rolls-Royce roads,” noting that Namibia could achieve wider network coverage through more cost-effective designs.
“When funding is channelled into prestige upgrades rather than essential maintenance, motorists ultimately bear a double cost burden: higher levies and faster vehicle depreciation due to deteriorating road surfaces. Poor road maintenance is strongly associated with increased wear on suspensions, tyres, bushings, and braking systems, raising annual maintenance expenses for both households and businesses,” Simonis Storm said.
From a market perspective, these cost dynamics are likely to influence vehicle purchasing behaviour, Simonis Storm added.
Higher running costs typically encourage shifts toward smaller engines, hybrid options, and more fuel-efficient models, particularly in the entry- and mid-range segments where buyers are highly price-sensitive. Fleet operators may extend replacement cycles or switch to models with lower lifetime running costs. As a result, instalment and leasing credit could become more concentrated in efficient segments, while demand for larger petrol- and diesel-heavy models may soften unless supported by commercial necessity.
Equally important are the broader macroeconomic effects, Simonis Storm said. “A higher fuel levy would lift transport-related inflation, push retail distribution costs upward, and weigh on real disposable income. Over time, this has a dampening effect on consumer confidence and credit demand, which could moderate sales momentum unless offset by strong business activity or favourable financing conditions.”
This follows a recent proposition by the Road Fund Administration (RFA) for a significant increase in the fuel levy to N$4.46 per litre - an effective rise of N$2.06 per litre - to close a widening road-maintenance funding gap.
The request, Simonis Storm said, comes at a time when overall ownership costs are already elevated due to high fuel prices, insurance inflation and rising vehicle maintenance costs.
“Economically, the levy increase introduces a clear upward shock to the total cost of vehicle ownership (TCO). For private motorists, this would translate into an additional N$150 to N$300 per month, depending on vehicle type and distance travelled, while high-mileage users such as taxis, couriers and freight operators could incur N$900 to N$1 000 in extra monthly fuel expenses,” Simonis Storm said.
“Over a standard five-year financing period, the cumulative burden is material, ranging from N$9 000 for the average small car to more than N$50 000 for commercial fleets. These costs behave very much like an increase in monthly instalments, tightening already-strained household and business budgets,” it added.
'Rolls-Royce roads'
According to Simonis Storm, concerns around the efficiency of infrastructure spending add another layer to the policy debate. Industry commentators have criticised the development of unnecessarily high-specification projects, so-called “Rolls-Royce roads,” noting that Namibia could achieve wider network coverage through more cost-effective designs.
“When funding is channelled into prestige upgrades rather than essential maintenance, motorists ultimately bear a double cost burden: higher levies and faster vehicle depreciation due to deteriorating road surfaces. Poor road maintenance is strongly associated with increased wear on suspensions, tyres, bushings, and braking systems, raising annual maintenance expenses for both households and businesses,” Simonis Storm said.
From a market perspective, these cost dynamics are likely to influence vehicle purchasing behaviour, Simonis Storm added.
Higher running costs typically encourage shifts toward smaller engines, hybrid options, and more fuel-efficient models, particularly in the entry- and mid-range segments where buyers are highly price-sensitive. Fleet operators may extend replacement cycles or switch to models with lower lifetime running costs. As a result, instalment and leasing credit could become more concentrated in efficient segments, while demand for larger petrol- and diesel-heavy models may soften unless supported by commercial necessity.
Equally important are the broader macroeconomic effects, Simonis Storm said. “A higher fuel levy would lift transport-related inflation, push retail distribution costs upward, and weigh on real disposable income. Over time, this has a dampening effect on consumer confidence and credit demand, which could moderate sales momentum unless offset by strong business activity or favourable financing conditions.”
