South Africans will receive temporary relief from high fuel prices after Finance Minister Enoch Godongwana announced a R10 billion fuel levy cut, but economists warn that inflationary pressures could return when the measures are scaled back in 2027.
Announced during the Medium-Term Budget Policy Statement (MTBPS) in Parliament on Wednesday, the intervention comes as petrol prices have climbed above R30 a litre, putting further pressure on households, transport operators and businesses.
The temporary cuts will take effect from November 4, with economists warning that their impact on the broader cost of living may be limited.
How the R10 billion fuel levy relief will work
The general fuel levy will be reduced by R3 a litre for diesel and R1.50 a litre for petrol from November 4 to December 1. The relief will then be scaled back, with the diesel levy reduced by R1.50 a litre and the petrol levy by R1 a litre until January 5, 2027.
“These measures will provide R10 billion in support, at a fiscal cost of R10 billion in foregone revenue,” Godongwana said.
The intervention will be funded by reversing an earlier R10 billion transfer to the Central Energy Fund (CEF), returning the money to the National Revenue Fund to cover the cost of the relief. The funds originated from revenue overruns in the 2025/26 financial year and had been earmarked for allocation to the CEF.
Godongwana said: “This intervention will help ease cost-of-living pressures without compromising the sustainability of the budget.”
However, the temporary nature of the cuts raises questions about how much protection households and businesses will receive once the relief is withdrawn, particularly if international oil prices remain elevated.
Economists warn inflation pressure could return
Dr Lerato Ntuli, an economist at Anchor Capital, said the intervention should moderate the immediate inflation peak but was unlikely to change the broader inflation outlook.
“While the measure should moderate the near-term inflation peak, it is unlikely to alter the broader inflation trajectory,” Ntuli said.
She warned that fuel inflation was likely to accelerate again as the relief was withdrawn in early 2027, while the effects of higher oil prices continued to filter through the economy.
Frank Blackmore, lead economist at KPMG South Africa, welcomed the measures, saying lower fuel costs could help limit the pass-through of transport expenses into the prices of goods.
“Specifically, it has important ramifications for inflation in the economy, as most goods are moved around the country using vehicles that use diesel,” Blackmore said.
“I think this will be welcomed there, and the push through into the prices of products will be less than if this was not done.”
Blackmore also said higher-than-expected revenue from commodity-related taxes had given government room to increase its primary surplus and fund initiatives targeting crime, corruption and gender-based violence, while protecting the social wage.
However, he cautioned that the commodity-price windfalls underpinning the improved revenue position might not last.
ANC welcomes relief as ActionSA calls for more
The announcement has drawn contrasting political responses, with the ANC welcoming the intervention while ActionSA argued that it did not go far enough.
ANC secretary-general Fikile Mbalula said the relief would ease pressure on households during the busy festive travel period and help businesses transporting essential goods.
“Lower diesel means the trucks that carry our bread, our maize and our chicken pay less to move them, so the price on the shelf is protected,” Mbalula said.
He argued that lower petrol costs would also ease the burden on motorists and commuters.
ActionSA MP Alan Beesley said the intervention fell short of addressing the wider cost-of-living crisis and the structural problems affecting the economy.
“The temporary fuel levy relief, amounting to R10 billion, falls desperately short of addressing the impact of high fuel prices,” Beesley said.
He also questioned the government’s economic outlook after the growth forecast was revised downwards from 1.6% to 1.2%, arguing that there was no credible plan to tackle unemployment, poverty and weak growth.
Unions welcome cuts but call for lasting support
The Federation of Unions of South Africa (FEDUSA), which has been vocal about the rising cost of living and fuel prices, welcomed the temporary relief but called for a sustainable response to mounting affordability pressures.
FEDUSA general secretary Riefdah Ajam said: “Temporary relief cannot be the end of the conversation.”
She warned that fuel costs continued to drive up transport and food prices, placing further pressure on workers and struggling households.
The Motor Industry Staff Association (MISA) also welcomed the cuts, describing them as a victory for workers and their families after sustained calls for relief.
MISA chief executive officer of operations Martlé Keyter said rising transport costs were forcing workers to make difficult choices between employment and household necessities.
“Our members told us they were being forced to choose between getting to work and putting food on the table. MISA amplified that message directly to decision-makers and refused to let workers’ voices be ignored,” Keyter said.
However, the union said the relief remained temporary and called for further support if fuel prices stayed high, including targeted assistance for households dependent on paraffin.
Calls for deeper fuel price cuts
The Afrika Mayibuye Movement called for a reduction of at least R4 a litre in the general fuel levy on petrol and diesel, arguing that the announced cuts did not meet the scale of relief it had demanded.
“Families cannot be expected to absorb every international oil-price shock without meaningful state intervention,” the movement said.
The announcement follows calls from trade union COSATU for government to use the proposed R10 billion allocation to cushion consumers against rising fuel prices.
COSATU warned that escalating costs were putting pressure on jobs, small businesses and the prices of essential goods. COSATU parliamentary coordinator Matthew Parks said the impact was being felt across the economy.