No further fuel levy relief, as Treasury rebalances books

Finance Minister Enoch Godongwana says National Treasury will soon begin balancing the books to make up for government’s intervention on fuel prices after the war in the Middle East piled pressure on South African consumers and industries.

This is another signal from the head of the country’s fiscal policy that its current three-month long fuel price intervention will run its course in the coming months, dashing any hopes of another extension for now.

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Tabling his budget vote before members of parliament on Friday, Godongwana confirmed that the temporary reduction in the general fuel levy had cost the fiscus approximately R17.2 billion in foregone tax revenue.

“This is further disrupting an already fragile global economic environment, shaped by trade wars and supply chain vulnerabilities,” he said.

Despite these headwinds, Godongwana added that the African continent has demonstrated notable resilience, with sub-Saharan Africa projected to grow by 4.3%, while South Africa’s economy is expected to grow by 1.8% over the medium term.

“These projections reflect both continued recovery efforts across the continent and the structural constraints that continue to weigh on domestic economic performance. Against this backdrop, government is closely reviewing the fiscal and economic baseline assumptions underpinning the current framework.”

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Godongwana previously described the fuel levy relief measure as “revenue neutral” and said it would be funded through a combination of higher-than-expected tax collection and underspending, without any impact on the fiscal framework adopted by parliament following the 2026 Budget.

“Necessary adjustments will be made during the Medium-Term Budget Policy Statement (MTBPS) process to ensure that fiscal policy remains responsive to evolving global and domestic conditions,” he told MPs in a televised speech.

“We will review these numbers as part of the normal reviewal process towards the MTBPS. These global developments – of course that’s why we have to revisit these numbers – will have an impact on what we do as National Treasury, both on the revenue side, expenditure side, debt sustainability and the overall fiscal framework.”

Before the monthly announcement on fuel price adjustments in April, government stepped in at the eleventh hour by reducing the general fuel levy by R3 per litre.

This helped ease what would otherwise have been an even more painful shock at the pumps, caused by a surge in oil prices. South Africa’s domestic fuel prices are affected by Brent crude prices as well as the rand/US dollar exchange rate.

Despite this, fuel prices reached fresh highs, with diesel breaching the R31 mark per litre for the first time ever.

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Read:
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Fuel costs soar across Africa, governments race to respond

National Treasury and the Department of Mineral and Petroleum Resources extended the reduction in fuel taxes in May, as tensions between the US, Israel and Iran dragged on longer than anticipated. But the aid will be wound down from June.

The fuel price hikes have added to inflationary pressures, bringing the latest consumer inflation number to 4% in April, from 3.1% in March. This is now the highest inflation print since August 2024, when the headline rate was 4.4%.

This higher inflation, although expected, will likely push the South African Reserve Bank’s Monetary Policy Committee towards a path of higher policy rates when the panel meets again this week.

South Africa previously reduced its general fuel levy temporarily in 2022 to help offset a rise in prices after Russia’s invasion of Ukraine.

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