Pressure mounts on South African government to cap petrol price on Iran war

The government in South Africa is facing mounting pressure to intervene in fuel pricing as geopolitical shocks ripple through global oil markets as the authorities set to increase prices at month end.

The powerful Fuels Industry Association of South Africa (Fiasa) has demanded the deployment of fiscal and policy tools to cushion consumers while accelerating long-term energy security reforms.

At a briefing on Wednesday, the department of mineral & petroleum resources and Fiasa outlined a constrained policy environment in which domestic prices remain largely controlled by international crude oil costs and the rand-dollar exchange rate.

Among the recommendations is a call for the National Treasury to urgently assess whether there is fiscal space to temporarily reduce or suspend the general fuel levy and the Road Accident Fund Levy, which make up a substantial portion of the pump price.
The April adjustment adds a fuel levy increase of 14c/l and a Road Accident Fund levy increase of 7c/l.

South Africa’s Labour group Cosatu and Business Leadership South Africa (BLSA) had also recommended the fuel levy increase, announced in the February budget and scheduled to come into effect on April 1, be temporarily suspended to cushion the economy.

The coalition partner, DA has also called for a 50% reduction in the fuel levy and has written to President Cyril Ramaphosa and finance minister Enoch Godongwana about the matter.

“There have not been any announcements in this regard and therefore National Treasury cannot comment at this time,” the National Treasury told Business Day in an emailed response.

The country’s fuel supply remains stable due to diversified import sources, including Nigeria and Angola, but the industry is experiencing underrecoveries, meaning that purchased fuel at prices above the regulated benchmarks is set to be passed to consumers in future adjustments.

Should the war escalate and the Strait of Hormuz remain closed, a driver covering 1,000km a month at eight litres per 100km will need an additional R400 per month for every R5 per litre increase just to maintain current travel patterns.

Beyond tax relief, policymakers are being advised to reconsider the mechanics of price-setting itself, including increasing the frequency of fuel price adjustments from monthly to potentially biweekly intervals.

This would smooth volatility and reduce the severity of single price shocks, allowing for a more responsive alignment with rapidly changing global conditions.

Government departments, including social development and trade, industry & competition, have been urged to identify vulnerable households and sectors most exposed to second-round effects, particularly food, transport and energy costs, and design mitigation measures accordingly.

The cabinet is being advised to undertake detailed scenario modelling of fuel price trajectories based on different durations of the current geopolitical conflict. A key benchmark cited is the 2022 price spike following Russia’s invasion of Ukraine, when prices exceeded R26 per litre for several months.

South Africa has lost about half of its refining capacity in recent years, increasing reliance on imported refined products. However, reopening closed refineries is not seen as a viable near-term solution due to infrastructure degradation and continued dependence on imported crude.

“As long as you are dependent on imported crude oil, it will be a very different conversation if you have got local crude oil. If that crude oil is owned by government, it will be a very different conversation,” senior manager at department of mineral & petroleum resources Ralph Maake said during the briefing.

“You can’t reopen a refinery in a week, even if you want to. You’re talking about brownfield development. It’s not something that can help us deal with this short-term problem.”