DUMISANI JANTJIES | The true cost of delaying fuel price reform

Today, the first Wednesday of May 2026, South Africa witnesses the devastating impact of the global geopolitical oil shock as the latest pump price increases take effect.

Confirmed by the mineral & petroleum resources department in a media statement on Monday, the hikes reflect the Middle East conflict’s impact on our shores. While a relatively resilient rand has helped soften the initial blow, the underlying global cost under-recoveries remain severe, and upcoming months might be even worse.

Recognising the impending catastrophe, the ministers of finance and mineral & petroleum resources jointly announced that the short-term relief measures to address fuel price increases will be extended.

While this political concession provides a temporary positive step for consumers facing today’s increases, it is essential to unpack what this means for the pump price going forward, the macroeconomic survival of households and businesses, and the ticking timebomb of the Road Accident Fund (RAF).

The mathematics of today’s fuel adjustment starkly illustrates the fragility of our domestic economy. According to the National Treasury, the R3/l reduction in the general fuel levy for petrol will be extended until June 2.

More significantly, given the large, expected increases in the price of diesel, the temporary relief for diesel has been increased by 93c/l to R3.93/l, in effect reducing the general fuel levy for diesel to zero from today to June 2.

For the month of June the level of relief will be halved to phase it out, leaving relief of R1.50/l for petrol and R1.96/l for diesel, before returning to normal rates from July.

Extending the relief prevents the total collapse of the logistics sector, but we must not mistake a delayed beating for a victory.

• For businesses: Diesel is the lifeblood of the South African economy. The zero rating of the diesel levy for May acts as a vital, albeit temporary, shield for primary agriculture (just as winter planting and harvest begins) and road freight logistics. This will help prevent immediate mass insolvencies among transport SMEs.
• For households: The working class is already buckling under the weight of the recent 8.76% Eskom tariff hike and a VAT-adjusted cost of living that leaves zero room for discretionary spending. By suppressing the cost of transporting staple foods, this extension temporarily pauses the imported inflation that would have aggressively eroded household purchasing power. It is worth noting that the relief will further support the economy and is likely to boost state revenue collection due to better consumer demand.
• For the fiscus: Extending and expanding the levy break costs the National Revenue Fund an estimated R17.2bn in forgone tax revenue. The government claims this fuel levy relief measure is designed to be revenue neutral and will not have an impact on the fiscal framework adopted by parliament following the 2026 budget.

To protect the fiscal framework, the state intends to fund this shortfall through a combination of higher-than-expected forecast tax revenue and underspending. However, relying on windfall taxes and departmental underspending to fund consumption subsidies is a highly precarious strategy. The true details and structural impact of this R17.2bn hole will become clear only during the 2026 medium-term budget policy statement later in the year.

While the department of mineral & petroleum resources has initiated a review of the fuel pricing formula, the key structural challenges remain stark. This desperate, multibillion-rand scramble exposes the most glaring policy failure of our time: the continued funding of the RAF through a consumption tax on energy.

As the standing committee on public accounts hearings recently exposed, the RAF is in effect bankrupt. Mired in endless, self-inflicted litigation nightmares and administrative paralysis, its accumulated liability book is steadily approaching the half-trillion-rand mark.

Because the RAF is a state-owned entity this is a contingent liability of the state. Yet instead of executing the hard structural reforms necessary to fix the RAF, government keeps the entity on life support by attaching a levy of over R2 to every litre of petrol and diesel sold.

Funding a bankrupt accident compensation model through a tax on energy is economically destructive in normal times. During a global oil shock it amounts to national sabotage. When farmers buy diesel to harvest maize, or a logistics company fuels a truck to deliver bread, they are forced to pay a dysfunction tax to bail out the RAF. We are using the lifeblood of our domestic economy to subsidise a broken institution.

South Africa is unique in its stubborn adherence to this flawed model. Other jurisdictions have successfully built robust accident compensation systems without holding their national macroeconomic performance hostage:

• Mandatory third-party insurance model (UK & Europe): In the UK and across the EU road accident liability is largely privatised. It is a legal requirement for every registered vehicle to hold private third-party liability insurance. The risk is priced and managed by the private sector, completely removing the liability from the state’s balance sheet and entirely unlinking it from the price of fuel.
• The no-fault registration model (Australia & New Zealand): New Zealand’s Accident Compensation Corporation operates a “no-fault” model funded through a flat, mandatory social contribution fee attached to annual vehicle registrations and driver’s licensing, not through a volatile tax on fuel. These funds are ringfenced and do not fluctuate based on geopolitical oil crises.

We do not need more tax holidays; we need structural amputation. Parliament must pivot from passive oversight to active legislative intervention. Instead of waiting for the finance minister to drain the fiscus with temporary reprieves, the legislature must legislate for the immediate decoupling of the RAF levy from the national fuel price structure.

Transitioning the RAF to a hybrid model funded by a mandatory flat-fee contribution linked to vehicle licensing and private third-party insurance would instantly and permanently slash the cost of fuel by over R2/l without blowing a hole in general tax revenues.

Simultaneously, the National Treasury must isolate the historical RAF liability book. It must be ring-fenced and aggressively audited to claw back funds lost to systemic abuse, rather than expecting the daily commuter to pay off the deficit.

Furthermore, we must rapidly domesticate the African Continental Free Trade Area protocols to build an internal, regional energy economy that is immune to Middle Eastern chokepoints. The extension of the relief measures might be a welcome temporary step that saves face for the executive today, but unless we decouple the RAF and structurally reform the basic fuel price, the fuel cliff will simply be waiting for us in July.

• Jantjies, a former director of the parliamentary budget office, is a senior macroeconomic and fiscal analyst, professor of practice at the University of Johannesburg, and chair of the African Network of Parliamentary Budget Offices.