Big petrol price win for South Africa

The easing of fuel prices in South Africa—which is expected to continue into June—comes at harvest time for key crops in the agricultural sector.

This will not only ease the burden on the farmers and businesses as they harvest, but will also cut costs in freight and transport, ultimately easing food price inflation in the country.

According to Chief Economist of the Agricultural Business Chamber of South Africa, Wandile Sihlobo, fuel generally accounts for a sizable share of farmers’ input costs.

As an example, he noted that for grain farmers, fuel costs amount to between 11% and 13% of production costs.

In addition, many of South Africa’s key crops are transported by road due to the decline of effective rail networks over time. This makes fuel a central cost in agriculture in South Africa, he said.

Fuel prices came down by 22 cents per litre for 93 and 95 petrol, respectively, and between 41 and 42 cents per litre for diesel on Wednesday (7 May).

While the cuts are relatively small, they will add up and benefit the sector, Sihlobo said, and also bodes well for moderating food price inflation.

He noted that South African farmers will be harvesting grains, oilseeds and citrus in the coming period.

South African consumers have already been seeing moderating food price inflation, with Stats SA recording Food NAB at 2.7% in March 2025.

However, certain categories, like fruit and vegetables, are tracking higher, at over 7%.

For producers, the impact of the lower fuel prices can already be seen with producer price inflation (PPI) recording a 10.6% y/y and 10.8% y/y contraction in petrol and diesel prices in March.

A big positive for South African consumers is that the 72cpl – 86cpl cuts in April will again help ease inflation for that month, and the same fore May.

Even better is that June appears to be lining up for another cut to fuel costs, pushing the benefits even further.

Food prices expected to ease

According to the Bureau for Food and Agricultural Policy (BFAP), South African oilseed prices eased following the global market and a marginally stronger exchange rate in March.

Prices declined by 9.8% for soybeans and 8.2% for sunflower seeds. In addition, prices started to move below 2024 levels in March.

Estimates point to a stronger recovery in oilseed production, it said.

While lower fuel prices will help a great deal with keeping costs contained, the BFAP warned that other factors could still put pressure on food inflation.

It said food inflation pressure is expected to rise modestly in the coming months, driven by concerns associated with the policy direction of the new US government and potential impacts on the exchange rate.

“Emerging market currencies such as the Rand tend to come under pressure when global uncertainty increases, and in South Africa, this was further exacerbated by the uncertainty related to the stability of the Government of National Unity amid budget negotiations,” it said.

Thankfully, with the National Treasury’s decision to rescind the proposed increase in VAT, consumers are no longer faced with the possibility of additional pressure for items outside the zero-rated basket.

“Moreover, the anticipated rebound of the new summer crop harvest will provide relief to livestock producers through lower feed costs and ease the cost of core staples for consumers,” it said.