Government can’t afford long-term fuel support, finance minister warns

Stephen Grootes speaks to John Loos, Independent Economist about what an extended two-month fuel levy relief really means for South Africa’s economy, as the government tries to cushion consumers from surging global oil prices without blowing out an already stretched fiscus.

Listen to the interview in the audio player below.

South Africa’s temporary fuel price relief may be extended, but only for a short time.

Finance Minister Enoch Godongwana says government simply doesn’t have the money to keep supporting lower fuel prices for long.

At the beginning of April, government cut the fuel levy by R3 per litre to ease pressure on consumers. But the relief costs about R6 billion a month and is due to end on 5 May.

Godongwana says a decision will be made at the end of April on whether to extend it. At most, the support could last around three months in total, but no longer.

The sharp rise in global oil prices, driven by conflict in the Middle East, has made fuel more expensive for South Africa, which relies entirely on imports.

Speaking to Stephen Grootes on The Money Show, independent economist John Loos says sustained higher oil prices is likely to slow down the world's economy, and South Africa will not be immune to the effects.

He says government need to find the most suitable way to manage the situation.

"You could give some special grant to people as well...but the problem with special grants is they tend to become too difficult to get rid of after the crisis has passed on."

- John Loos, independent economist 

"The beauty of the fuel levy, I think at some point one normally expects petrol prices to drop again. It might take longer than expected...and then you can reimpose those levies without necessarily implementing a fuel price hike,"

- John Loos, independent economist 

Scroll to the top of the article to listen to the full interview.