This comes as the National Treasury and the Department of Mineral and Petroleum Resources on Tuesday confirmed an extension of the R3 per litre temporary fuel levy reduction into June.
Image: Armand Hough/ Independent Media
Pressure is mounting on the government to urgently overhaul the country’s fuel price regulatory structure, as economists and industry stakeholders warn that temporary relief measures are failing to address deeper structural challenges in the energy market.
This comes as the National Treasury and the Department of Mineral and Petroleum Resources on Tuesday confirmed an extension of the R3 per litre temporary fuel levy reduction into June.
According to projections by the Central Energy Fund, petrol prices could rise by more than R2 per litre, while diesel could surge by as much as R6 per litre. Paraffin, widely used by low-income households, is also expected to climb significantly, intensifying energy poverty.
The relief, which will be gradually phased out by June, comes at an estimated cost of R17.2 billion to the fiscus.
While the intervention has been widely welcomed, experts argue that without meaningful reform of the pricing mechanism, South Africa will remain vulnerable to repeated external shocks.
North-West University (NWU) Business School economist Professor Raymond Parsons said the scale of the global energy crisis makes continued government intervention unavoidable, but stressed that deeper changes are needed.
“In managing the new geopolitical economic challenges, it therefore remains possible for South Africa to deal with the global energy shock in ways that need not jeopardise fiscal credibility,” said Parsons.
“These include the urgent overhaul and reform of the fuel price regulatory structure by the Ministerial task team coordinating the government’s response holistically to mitigate the impact on the cost of living, fuel and food security. Timelines should be set to finalise this review,”
Parsons noted that while the intervention is justified, it remains a short-term solution.
“The magnitude of the global energy price shock to the economy makes an extension of the partial petrol and diesel relief to further mitigate the impact of negative global developments inevitable and desirable,” he said.
However, he cautioned that “available fiscal space nonetheless needs to be critically interrogated,” warning that difficult policy trade-offs lie ahead as government balances support measures with fiscal sustainability.
The basic fuel price (BFP), the single largest component of South Africa’s petrol price, is directly influenced by global supply and demand, decisions by major oil producers, and movements in the rand-dollar exchange rate. As South Africa imports the majority of its fuel, these external factors leave little room for domestic control over price movements.
Industry players, particularly in agriculture, have echoed concerns about the sustainability of current fuel pricing dynamics.
SA Canegrowers welcomed the extension of fuel levy relief but warned that rising diesel costs continue to place severe strain on farmers.
“Extending the fuel levy reduction is therefore not just short-term relief; it is essential to protecting jobs, sustaining rural economies, and ensuring the continued viability of South Africa’s sugar industry,” said Higgins Mdluli, chairman of SA Canegrowers.
Fuel accounts for a significant portion of production costs in agriculture, with sugarcane growers spending between 17% and 29% of their total costs on fuel and transport. Despite increased rebates, stakeholders say these measures do not translate into immediate relief as global oil prices continue to climb.
Beyond immediate pressures, there is growing consensus that South Africa’s fuel pricing framework needs structural reform to improve resilience and reduce dependence on imported fuels.
Zero Carbon Charge (CHARGE) also warned that the current system leaves the country exposed to global volatility. Co-founder and chair Joubert Roux said temporary tax relief does little to resolve underlying issues.
“Government’s intervention is necessary and welcome in the short term, but it highlights the reality that South Africans remain exposed to global oil price volatility,” Roux said. “This is not a problem that can be solved through temporary tax relief.”
CHARGE estimates that South Africa spends around R300bn annually on petrol and diesel, much of it linked to imports. The organisation argues that long-term solutions lie in transforming the energy mix and reducing reliance on traditional fuels.
“We cannot continue to respond to a structural problem with temporary measures,” Roux said. “If we want to protect the economy from repeated financial shocks, we need to reduce our dependence on imported fuel.”
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