Treasury extends fuel relief, but price shock still looms

South African motorists are set to continue receiving fuel levy relief, but experts warn it may not be enough to shield consumers from rising pump prices. 

National Treasury has extended the temporary fuel levy cut, keeping petrol relief at R3 per litre and increasing diesel relief to around R3.93, in an effort to cushion households from global oil pressures and a weaker rand.

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Despite the relief, fuel prices are still expected to climb sharply, with petrol projected to rise by more than R2 a litre and diesel by as much as R5.

The Automobile Association (AA) said while the move helps, it does not fully offset the impact, noting that the government still has additional tax "room" available if needed.

"The real concern here is how much of the tax that's available to the state, the state is using. Whilst we welcome the additional 93 cents, rounding out the complete general fuel levy on the diesel side, there's still another R1.10 available for petrol. Broadly speaking, the original tax base was R6.47. So, it's a plus and a minus. The plus is that some of the taxes are being removed from the table, taking the burden away from the consumer, but there's still a lot more leverage available for the government to use down the line," explained AA CEO Bobby Ramagwede.

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"The burning platform right now is that we sit in a situation where we have very little to no fuel reserves to cushion the country from price fluctuations and shocks. In addition, we've got an unregulated diesel sales platform that allows retailers to upsell and downsell at their leisure.

"I think what we should be focused on is the crisis, which is the realisation that we cannot avoid the inevitable, which is that once we've exhausted all of our taxes in the fuel price, we are complete price takers to whatever the price is in the market.

"The reality of it is, if we allow for fuel prices to run rampant in this country, we'll have a general inflation structural change. That is the price of general goods and services will increase beyond levels that we can digest. That sort of narrative and that idea are not foreign to the government, and they're definitely considering it. So, what we anticipate is likely to happen is that we'll have a continuation of these relief packages well into June, possibly into September."

Ramagwede warned that South Africa risks wider inflation if fuel costs continue to rise unchecked, calling for stronger fiscal choices rather than repeated short-term fixes.