The freight and logistics sector expects some relief after a drop in both grades of diesel on Wednesday.
Image: Jacques Naude / Independent Media
– South Africa's freight and logistics sector has welcomed the sharp decline in diesel prices that took effect on Wednesday, providing some relief to transport operators after months of escalating fuel costs.
However, industry leaders warn that structural challenges and global uncertainties continue to threaten the sustainability of the sector.
The latest fuel price adjustment saw the wholesale price of diesel decrease by approximately R3.25 per litre for 0.05% sulphur diesel and R2.62 per litre for 0.005% sulphur diesel, following steep increases recorded in April and May amid higher international oil prices.
Gavin Kelly, CEO of the Road Freight Association described the reduction as a positive development for long-haul freight operators, whose profitability is heavily influenced by fuel costs.
“Diesel is the lifeblood of the road freight sector, accounting for between 30% and 50% of a typical operator's total cost base,” Kelly said.
He noted that the decrease would provide welcome relief to operators of heavy commercial vehicles who have had to absorb elevated fuel costs in recent months.
However, he cautioned that the full benefit of the price reduction is being diluted by other cost pressures within the fuel pricing system.
“The slate levy — a surcharge applied to recover the R18.28 billion cumulative under-recovery in the fuel pricing system — has increased by R0.35/l to R1.58/l, absorbing a meaningful portion of the international price reduction,” he said.
Beyond fuel costs, Kelly highlighted several structural issues affecting the freight sector, including deteriorating road infrastructure, rising toll fees, skills shortages and exchange-rate volatility.
“South Africa's logistics competitiveness — and the cost of living for ordinary citizens — depends on a stable, predictable, and equitable fuel pricing framework.
The Truckers Association of South Africa (TASA) also welcomed the diesel price decrease but stressed that operators remain under considerable financial pressure.
Tonny Molise, TASA deputy president said the reduction provides much-needed breathing room but does not resolve the broader challenges confronting transport companies.
“This single drop is not a complete fix. Operators are still under immense pressure. We are currently facing elevated debt service costs and high interest rates, which are severely draining cash flows and making the day-to-day running of transport operations incredibly difficult,” Molise said.
He warned that geopolitical tensions remain a significant risk to future fuel prices.
“The ongoing conflict involving the US, Iran, and Israel, alongside disruptions surrounding the crucial Strait of Hormuz shipping lane, continues to threaten global energy stability and push up fuel baselines.”
Given these uncertainties, TASA has called on the National Treasury to maintain the current general fuel levy relief measures and avoid introducing additional tax burdens on fuel users until international conditions stabilise.
“If they want to safeguard our supply chains and actually get the South African economy moving, there is a need for sustained, aggressive government intervention to cushion local operators from these external shocks,” he said.
Industry experts believe the diesel price reduction could have broader economic benefits beyond the transport sector.
Andrew Robinson, director of Deneys Durban, said lower diesel prices could positively affect logistics costs across the continent, given the dominant role road transport plays in African trade.
“However, much will depend on what terms have been agreed amongst logistics providers with their customers – long-term arrangements almost inevitably have terms that either pass costs on directly to customers or have a formula that spreads the impact of any fuel increase equitably,” he said.
“Short-term arrangements may not do so – and ad hoc arrangements will be performed on a quote based on the price of diesel at the time the quote was compiled.”
Dr Bonke Dumisa, an independent analyst, said the diesel price decrease could help ease inflationary pressures that have emerged following the substantial increases seen over the previous two months.
“Most, at least over 90%, of our goods are transported by road; hence these huge diesel price increases were inflationary, which puts upwards pressure on the repo rate increases. These diesel price decreases will help to neutralise such potential high inflationary trajectories.”
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