Finance Minister Enoch Godongwana has said the government’s costly intervention to shield South Africans from soaring fuel prices is coming to an end.
In April, the government slashed the general fuel levy by R3 per litre to soften the blow for motorists and businesses after conflict in the Middle East sent global oil prices skyrocketing.
The intervention came just before the monthly fuel price adjustment and prevented what would have been a far steeper increase in petrol and diesel prices.
South Africa’s fuel prices are heavily influenced by international Brent crude oil prices and the rand-dollar exchange rate, both of which came under pressure as tensions between the United States, Israel and Iran intensified.
Treasury and the Department of Mineral and Petroleum Resources later extended the tax relief into May as geopolitical tensions persisted longer than expected.
However, the support will now be phased out from June, signalling the end of what has effectively been a three-month fuel subsidy for consumers.
Tabling his budget vote in Parliament on Friday, Godongwana confirmed that the temporary reduction in the fuel levy had already cost the government about R17.2 billion in lost tax revenue.
“This is further disrupting an already fragile global economic environment, shaped by trade wars and supply chain vulnerabilities,” he said.
The minister warned that the government must now reassess its fiscal position amid mounting global uncertainty and continued domestic economic pressures.
Despite the challenges, Godongwana said Africa had shown resilience in difficult conditions. “Sub-Saharan Africa is projected to grow by 4.3%, while South Africa’s economy is expected to grow by 1.8% over the medium term,” he said.
“These projections reflect both continued recovery efforts across the continent and the structural constraints that continue to weigh on domestic economic performance.”
“Against this backdrop, the government is closely reviewing the fiscal and economic baseline assumptions underpinning the current framework.”
Godongwana has previously described the fuel levy relief as “revenue neutral”, arguing that the temporary shortfall would be covered through higher-than-expected tax collections and government underspending.
“Necessary adjustments will be made during the Medium-Term Budget Policy Statement process to ensure that fiscal policy remains responsive to evolving global and domestic conditions,” he said.
While international fuel price movements have recently improved, the withdrawal of the levy relief means South African motorists are still facing another painful increase at the pumps next week.
According to the latest data from the Central Energy Fund, petrol prices have finally shifted into an over-recovery after months of sharp under-recoveries.
Petrol prices started the month showing an under-recovery of roughly 85 cents per litre, but have since moved into a small over-recovery of between 3 and 8 cents per litre. However, this improvement is far too small to absorb the return of the fuel levy.
From June, the government will add back R1.50 per litre of the temporary levy reduction, with the remaining R1.50 returning in July when the relief measure fully expires.
As a result, motorists are still expected to face petrol price hikes of more than R1.40 per litre next week, despite the recent improvement in fuel recoveries.
Diesel users may see some relief, however. Diesel recoveries have strengthened significantly enough to absorb the phased return of the levy.
Based on current data, diesel prices could still decline by between R2.30 and R3.00 per litre even after half the levy relief is removed.
