South Africa announces one-month fuel levy cut to limit pump price hikes

South Africa will reduce its fuel levy for one month to stop fuel prices rising even further in April, it said on Tuesday, after trade unions and business groups pressured the government to intervene to cushion the impact of the ​Iran war. The finance and petroleum ministries said in a statement that the government would recoup ​via other mechanisms the 6 billion rand ($350.69 million) of tax revenue that it ⁠would forgo via the short-term levy cut. Work is under way on a broader package of measures ​to support households and key sectors of the economy, the statement said, as despite the levy cut ​the regulated petrol price will rise by about 15% in April and wholesale diesel by 40%.

The general fuel levy will be lowered by 3 rand for April, taking the levy to 1.10 rand per litre for petrol and 0.93 ​rand per litre for diesel. Finance Minister Enoch Godongwana told reporters the government would monitor developments in the ​Middle East and that if the conflict persists, it may provide some fuel levy relief in May and June. “I ‌don’t ⁠think it can be sustained beyond June,” he said.

South Africa implemented similar relief in 2022 following the start of Russia’s war in Ukraine. That reduction of 1.5 rand per litre remained in place for several months before being lowered and then withdrawn. South Africa’s central bank warned ​of inflationary risks from rising ​fuel prices at ⁠its monetary policy meeting last week, saying fuel inflation of more than 18% was expected in the second quarter.

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The risk-sensitive rand has fallen nearly 7% against ​the dollar since the U.S. and Israel launched strikes on Iran in ​late February, ⁠adding to inflationary risks. South Africa imports most of its petroleum products, leaving it highly exposed to swings in global energy prices.

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