South Africans will receive temporary relief from high fuel costs after Finance Minister Enoch Godongwana announced a reduction in the fuel levy amounting to 10 billion rand. However, economists warn that this measure will only temporarily postpone inflationary pressure threatening household budgets and business expenses.
The intervention was announced during the Medium-Term Budget Policy Statement (MTBPS) in Parliament the day before. It comes against a backdrop of petrol prices exceeding 30 rand per liter, which increases the burden on the population, transport operators, and businesses already struggling with the rising cost of living.
Under the adopted measures, the total fuel levy will be reduced by 3 rand per liter for diesel and by 1.50 rand per liter for petrol from November 4 to December 1. After this, the reduction will be adjusted: the levy on diesel will decrease by 1.50 rand per liter, and on petrol by 1 rand per liter, lasting until January 5, 2027.
Godongwana stated that 'these measures will provide support of 10 billion rand at fiscal costs of 10 billion rand in terms of lost revenue.' This support will be financed by cancelling a previously made transfer to the Central Energy Fund (CEF), as the funds will return to the National Revenue Fund to cover the cost of this assistance. These funds were originally received from surplus revenue in the 2025/26 financial year and were intended for distribution to the CEF.
The Finance Minister emphasized that 'this intervention will help mitigate the pressure related to the cost of living without jeopardizing budget sustainability.' Nevertheless, the temporary nature of these reductions raises questions about what protection households and companies will receive after the aid ends, especially if international oil prices remain high.
Dr Lerato Ntuli, an economist from Anchor Capital, believes that this measure should slow the peak of inflation in the short term, but it is unlikely to change the overall inflation trajectory. She warned that fuel inflation is likely to accelerate again as the aid ends in early 2027, while the effects of higher oil prices continue to impact the economy.
Frank Blackmore, lead economist at KPMG South Africa, welcomed the steps, noting that the reduction in fuel costs could help limit the passing on of transport costs to final goods prices. He explained that this is important for inflation in the economy, as most goods are moved across the country using diesel-powered vehicles. Blackmore added that this would be positively received, and the rise in product prices would be less than if the measures had not been taken.
Blackmore also noted that unexpectedly high tax revenues from commodities gave the government the opportunity to increase its primary surplus and fund initiatives aimed at combating crime, corruption, and gender-based violence, while protecting social income. However, he cautioned that commodity revenue surges, which underpin the improvement in the fiscal position, may not last long.
The announcement sparked various political reactions: ANC welcomed the intervention, while ActionSA stated it was insufficient. ANC Secretary-General Phikile Mbalula said the aid would ease pressure on households during the busy holiday travel period and support businesses involved in transporting essential goods. He stressed that the lower cost of diesel means that trucks carrying bread, maize, and chicken pay less, which protects shelf prices, and also eases the burden on drivers and passengers due to lower petrol prices.
However, ActionSA MP Alan Bisley argued that the temporary 10 billion rand fuel levy reduction is too small to solve the problem of the rising cost of living and structural economic issues. He also questioned the government's economic forecasts after lowering the growth projection from 1.6% to 1.2%, asserting that there is no convincing plan to tackle unemployment, poverty, and weak growth.
The Federation of South African Trade Unions (FEDUSA), which has actively spoken out about the rising cost of living and fuel prices, supported the temporary fuel levy reduction announced by Finance Minister Enoch Godongwana, but demanded a sustainable response to growing affordability pressures. FEDUSA Secretary-General Rifda Adjam warned that temporary aid cannot be a permanent solution, as fuel costs continue to drive up transport and food prices, putting additional pressure on workers and needy households.
The Motor Industry Sector Association (MISA) approved the cuts, calling them a victory for workers and their families after prolonged calls for assistance. MISA Chief Operating Officer Martle Cater reported that rising transport costs force workers to make difficult choices between working and meeting basic family needs. He noted that union members reported having to choose between commuting to work and buying food, and MISA conveyed this message to decision-makers.
However, the union pointed out that the aid remains temporary and called for further support if fuel prices remain high, including targeted assistance for households dependent on paraffin. The Movement of Africa Maybuye demanded a reduction in the overall fuel levy for petrol and diesel of at least 4 rand per liter, arguing that the announced cuts do not match the scale of the required assistance. Representatives of the movement stated that families cannot be forced to absorb every shock from global oil prices without significant state intervention.
This announcement followed calls from the COSATU union for the government to use the proposed 10 billion rand allocation to protect consumers from fuel price hikes. COSATU warned that rising costs are putting pressure on jobs, small businesses, and the prices of essential goods. COSATU's coordinator in parliament, Matthew Parks, stated that this impact is felt across the entire economy.
