Fuel costs soar across Africa, governments race to respond

With fuel prices surging as much as 81%, African governments are rolling out subsidies and cutting taxes to help cushion households from an increase in energy costs triggered by the US-Israeli war on Iran.

Malawi, the world’s poorest country after Burundi, raised jet fuel by as much as 81%. Countries including Zambia, Tanzania, Namibia and South Africa also increased regulated prices from Wednesday.

In Mauritania, senior officials, including President Mohamed Ghazouani, have taken pay cuts following the price increases, spokesman Houssein Meddou said.

Some of Africa’s poorest nations have been hit hardest by the war, which shut the Strait of Hormuz and sent oil prices soaring to reignite inflation. Governments are scrambling to cushion the blow by deploying a patchwork of measures ranging from tax cuts and subsidies to delaying fuel price increases.

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Zambia zeroed out its value-added tax and suspended an excise duty on fuel imports to manage prices. It raised petrol prices by 2% and diesel 28% for April.

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South Africa cut fuel taxes to cushion the blow that still resulted in a 15% rise in the retail price of 95-octane petrol to R23.36 per litre and wholesale diesel going up 40% overnight.

Regulated pricing regimes across much of the continent are delaying the full impact of higher global costs, while eroding government revenues as levies are reduced.

The ripple effects are already spreading. A.P. Moller-Maersk A/S added an 8% fuel surcharge on containers moving through South African ports.

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Malawi has also adjusted its pricing mechanism, temporarily shifting to a fortnightly average instead of a monthly one, prompted by suppliers.

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Mozambique said it will delay price increases and instead use a stabilisation fund to help cushion the impact, but it still faces a risk of foreign exchange shortages and lack of physical fuel deliveries from the Middle East.

The rise in crude prices and Mozambique’s position as a net importer of oil products is expected “to put pressure” on foreign exchange availability and create fuel shortages in the coming months, S&P said in March 27 rating update.

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