Big petrol price changes coming for South Africa
Finance Minister Enoch Godongwana has announced that a Fuel Price Intervention Plan will soon be tabled in Cabinet, with the aim of tackling high prices in South Africa.
The Democratic Alliance confirmed that the plan was to be tabled, saying that it “eagerly awaits the details”.
The plan is expected to be anchored on “measures to tackle high fuel prices…[and] ensure that South Africans can afford the fuel and the ability to transport,” the DA quoted the minister saying.
An intervention plan follows commitments from President Cyril Ramaphosa in July to tackle the rising cost of living in South Africa.
During the formal opening of parliament in July, following the establishment of the Government of National Unity (GNU), the president specifically spoke about reviewing the petrol price formula in the country to do this.
Ramaphosa said the GNU would undertake a “comprehensive review of administered prices, including the fuel price formula”.
“This we did for a while; as prices of fuel kept rising, we found a way we could stabilise the price. We will seek to find ways to address this challenge,” he said at the time.
Previous proposals
Several interventions have been proposed in the past to address the petrol prices in South Africa. Back in 2022, the government proposed three changes that could impact pricing. These include:
- The possible introduction of a price cap;
- A proposal to stop publishing guidance on diesel prices;
- A process to review the Regulatory Accounting System (RAS).
These proposals were put forward as South Africa and the world were dealing with the fallout of the Russian invasion of Ukraine. During this time, the Treasury also directly intervened to provide temporary relief amid successive hikes.
Treasury previously said that a review of the RAS could result in a significant decrease of R1.03 cents/litre by 2028.
However, this will take significantly longer to implement than other measures and investigations need to take place to fully understand the changes that can be implemented.
Similarly, while the Treasury has previously proposed a fuel price cap, it warned that it will require ‘significant investigations’ before officially being introduced.
A petrol price cap was suggested for 93 unleaded petrol, which would require retailers to sell fuel below the regulated prices.
Removing the guidance on diesel prices, meanwhile, would promote competition among retailers.
Cost of living
Cutting petrol prices in any measure would go a long way in easing the cost of living for many South Africans.
Not only would it have a direct impact on the cost of petrol at the pumps, and the cost of public transport, it would also have an impact on inflation all along the supply chain.
Fuel prices in South Africa are set to swing into a net decrease in September, with three consecutive cuts in May, June and July already feeding through to big positives in inflation.
Petrol prices shot up by R3.00 per litre in consecutive hikes from January to May 2024, causing a concomitant spike in inflation over the period.
However, with another ~75 cents per litre cut expected for September, the total price reduction since June will total R3.23, giving South African motorists a small but positive swing in prices of around 23 cents per litre since the start of the year.
The impact of lower fuel prices is already being seen on a national level, with headline inflation for July improving to 4.6%—a much better result than anticipated by the market.
Fuel prices dropped for a second straight month in July, with fuel inflation dropping from 4.6% in June to 3.6% in July.
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