South Africa Prepares Gradual Exit From Fuel Tax Relief as Inflation Risks Build

Mintesinot Niggusie

South Africa plans to gradually unwind temporary fuel tax relief measures introduced to cushion consumers from rising global oil prices, with full withdrawal expected by July.

The National Treasury said the existing 3 rand per litre reduction in gasoline levies will remain in place until June 2, while diesel relief has been adjusted to 3.93 rand per litre over the same period. The finance ministry is proposing to halve the support in June before fully phasing it out.

The fiscal cost of the intervention is estimated at 17.2 billion rand in lost revenue between April and June, reflecting the government’s attempt to contain the pass-through of higher international energy prices.

The adjustments come as global oil markets remain under pressure from the prolonged Middle East conflict, which has pushed crude prices up by more than 50 percent since late February. South Africa, which imports all of its crude oil, is particularly exposed to external price shocks.

Fuel accounts for nearly 4 percent of the country’s inflation basket, making transport energy costs a key driver of broader consumer price movements. Pressure is also spilling into the real economy, with rising diesel prices affecting agricultural production costs.

The South African Reserve Bank has flagged growing inflation risks linked to energy prices. Governor Lesetja Kganyago said policymakers remain ready to adjust monetary policy if price pressures persist, with inflation expected to peak at around 4.3 percent in April.

To reduce supply constraints, South Africa has increased imports of refined petroleum products from the United States, partly offsetting reduced inflows from traditional suppliers in the Middle East. At the same time, the government is reviewing the fuel pricing framework in consultation with industry stakeholders.