South African consumers and businesses will from Wednesday endure another sharp increase in fuel prices, which are set to send living and production costs spiralling further and posing risks for inflation.
The looming price shock announced on Monday comes despite the government recently announcing it would extend its general fuel levy reduction for petrol and pause the tax on diesel for another month to lessen the impact of the Middle East conflict on global oil prices.
South African Reserve Bank governor Lesetja Kganyago reiterated on Monday that the inflation outlook has turned more dire, denting the chances of interest rate cuts soon.
The petrol retail price will jump by a hefty R3.27/l from Wednesday while the wholesale cost of diesel will surge R5.27. Paraffin, which many households — especially those in informal settlements with limited or no access to electricity — still use for cooking and lighting, will be R4.22/l more expensive.
Being a net oil importer, South Africa has been among the countries hardest-hit by the bloodbath on global markets since the US and Israel started waging war against Iran on February 28, throttling the passage of commodities through the Strait of Hormuz.
Domestic fuel prices are adjusted monthly to take into account international crude oil and petroleum product prices, shipping costs and the rand exchange rate.
The average Brent crude oil price increased from $93.67 to $101 in the period under review due to “the continued tension between the US and Iran, the closure of the Strait of Hormuz and damage to other crucial infrastructure, which have affected crude oil supply”, the department of mineral & petroleum resources said.
It was offset by a relatively stable rand against the US dollar during the period.
The fuel price increases would have been much higher without the government committing to keeping in place until June 2, a R3/l reduction in the general fuel levy for petrol and suspending the R3.93 levy on diesel. For this, it will forgo R17.2bn in tax revenue before reinstating the levies by July.
The knock-on effects of the fuel hikes will be widespread, placing additional strain on already under-pressure households and businesses, particularly in the transport, logistics, agriculture and small enterprise sectors, said Henry van der Merwe, chair of the South African Petroleum Retailers Association.
“Even with intervention on the levy side, the magnitude of these adjustments means inflationary pressures will intensify. This raises concerns not only for consumers but also for the broader economic outlook, including the potential for further interest rate pressure in the months ahead,” Van der Merwe said.
During a public lecture at Rhodes University on Monday evening, Kganyago said South Africa’s inflation headache could have been worse without the Bank’s prudent policy stance, including the adoption last year of a lower 3% inflation target, after years of pursuing a 3%-6% band with a 4.5% midpoint.
Kganyago said the Bank’s decision to tread cautiously in the face of concerning geopolitical developments in recent months, by steering clear of big and too frequent cuts in its benchmark rate at its policy meetings is now paying off.
“This meant our policy stance was not immediately rendered obsolete when trouble did come with the conflict in the Middle East and the closure of the Strait of Hormuz,” Kganyago said.
“We had inflation at exactly 3%, with core also at 3%, in line with our new target. This was a reasonably good starting point for confronting a severe shock.”
The well-established playbook for dealing with supply-side shocks in monetary policy is to look through the initial or first-round effects and rather focus on the second-round effects, he said.
Second-round effects
“The oil price goes up and then petrol and transport get more expensive. Monetary policy cannot do much about this. What is relevant for monetary policy is that period after the shock has passed,” he told his audience.
“The problem is that inflation does not always fall when the shock passes. Instead, inflation can be persistently higher. This happens when the price shock broadens out into the economy: it is no longer just the one category, like fuel, that is more expensive, but everything.
“We call these second-round effects, and they tend to be most visible in inflation expectations and wages. For central banks facing a price shock, the key is to manage the second-round effects.”
He said given the risks to inflation and the uncertainty about the Middle East conflict, in its next few meetings the Bank will have to “make tough decisions about whether second-round effects are coming or whether we have enough space to look through”.
“If we do have to raise rates, it will be to sustain low and stable inflation and all the benefits that brings,” said Kganyago.
- Update, 5 May 2026, This story has been updated after the government acknowledged that a calculating error resulted in it incorrectly stating the price increase for diesel as R6.19 instead of R5.27.
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