The government is extending its general fuel levy reduction for petrol by another month and pausing the tax on diesel altogether to partially cushion consumers from the blow of another round of hefty price increases in May stemming from the war in the Middle East.
This will bring the estimated cost of the temporary fuel levy relief introduced on April 1 to R17.2bn in forgone tax revenue, the National Treasury and the department of mineral & petroleum resources said in a joint statement on Tuesday.
Finance minister Enoch Godongwana proposes to halve the level of relief after June 2 and phase it out before July.
The government first announced on March 31 that it would provide price relief until May 5 to mitigate the impact of record high fuel price hikes on April 1.
“Since this announcement, the continuation of the Middle East conflict has resulted in consistent pressure on global oil prices, which has led to increases in domestic fuel prices,” it said on Tuesday, adding that the extended relief is necessary given concerns about the impact of the price hikes on inflation and economic growth.
The R3/l reduction in the general fuel levy for petrol will stay in place until June 2, while the temporary relief for diesel will be increased by 93c to R3.93/l. As a result, the general fuel levy for petrol will remain at the present R1.10/l while none will be charged for diesel.
Thereafter, the levy for petrol will be adjusted to R2.60/l and that for diesel to R1.97/l with the relief being phased out before July. This means that from that month consumers will feel the full effect of international oil prices and the rand exchange rate on domestic fuel prices.
The general fuel levy is built into the retail price of fuel and the proceeds are used to fund overall government spending, including healthcare, education, social grants, policing and public services as well as infrastructure.
In his February budget, Godongwana announced that fuel levies would rise in line with inflation, with the general fuel levy set to go up by 9c/l for petrol and 8c/l for diesel from April 1.
The carbon fuel levy — intended to encourage the use of cleaner energy sources — would increase by 5c/l and 6c/l for petrol and diesel, respectively, while the Road Accident Fund levy would be 7c/l higher.
South Africa is a net importer of oil and petroleum products, making it vulnerable to the volatility that has rocked global markets since late February after the US and Israel waged war against Iran, strangling oil supply.
Present estimates indicate that the prices of petrol, diesel and paraffin are on track for another hefty rise from May 6, even with the extension of the general fuel levy relief.
Iran has extended an offer to supply crude oil to South Africa, a proposal communicated to officials in the department of mineral & petroleum resources this month, according to people familiar with the matter.
The government has given no indication it intends to accept, with mineral & petroleum resources minister Gwede Mantashe declining to comment on the matter.
South Africa relies on a broad mix of crude and refined fuel suppliers, with African producers Nigeria and Angola among its primary sources.
Recently, Mantashe told parliament’s portfolio committee on mineral and petroleum resources that South Africa largely relies on the Strait of Hormuz — which has been closed during the war — for processed products. The government is looking to supplement the 60% finished product supply domestically through the Natref refinery and a Cape Town refinery.
“There’s no shortage of petrol, oil or diesel in the country. It is just expensive. That is the function of the price,” Mantashe said.
The higher fuel prices are expected to feed into inflation, putting paid to expectations at the start of the year that the South African Reserve Bank would cut interest rates at least twice in 2026.
The Bank cited a deteriorated inflation outlook when it kept its key policy rate unchanged at 6.75% in March, flagging the possibility that it might in fact raise borrowing costs this year.
In its latest monetary policy review the Reserve Bank reiterated that its baseline forecast has headline inflation peaking at 4% in the second quarter of 2026 before easing back to its 3% target by late 2027. This is provided the Middle East conflict is not protracted.
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