South Africa has announced a temporary reduction in its fuel levy for April in an effort to ease pressure on motorists and businesses, following calls from trade unions and business groups for government intervention amid the economic impact of the Iran war.
According to a joint statement from the finance and petroleum ministries on Tuesday, the general fuel levy will be cut by 3 rand for the month. This will bring the levy down to 1.10 rand per litre for petrol and 0.93 rand per litre for diesel. However, authorities noted that the government plans to recover the estimated 6 billion rand ($350.69 million) in lost tax revenue through alternative measures.
Despite the relief, fuel prices are still expected to rise significantly in April, with petrol projected to increase by about 15% and wholesale diesel by around 40%. The government added that it is working on a broader set of measures aimed at supporting households and key sectors of the economy.
Finance Minister Enoch Godongwana said the situation in the Middle East remains under close watch, indicating that further fuel levy relief could be considered for May and June if the conflict continues. However, he cautioned that such support would likely not be sustainable beyond June.
South Africa’s central bank has already raised concerns about inflationary pressures linked to rising fuel costs. At its recent monetary policy meeting, it warned that fuel inflation could exceed 18% in the second quarter of the year.
The country’s currency has also come under strain, with the rand losing nearly 7% of its value against the dollar since the United States and Israel launched strikes on Iran in late February, further increasing inflation risks.
As a major importer of petroleum products, South Africa remains highly vulnerable to fluctuations in global energy prices. Fuel prices in the country are adjusted monthly based on a formula that considers global crude oil prices, exchange rate movements, and local taxes such as the fuel levy.
Similar measures were previously introduced in 2022 following the outbreak of Russia’s war in Ukraine, when the government implemented a 1.5 rand per litre fuel levy reduction that remained in place for several months before being gradually phased out.
By: Andrews Kwesi Yeboah