South Africa Considers Reducing Fuel Levy Amid Price Pressures from Iran Conflict

South Africa is contemplating a reduction in fuel levies to alleviate the increasing pump prices influenced by the Iran war and global energy disruptions.

Enoch Godongwana, South Africa’s Finance Minister, is considering a decrease in the fuel levy to alleviate the impact of rising fuel prices caused by the ongoing conflict in Iran, as stated by a senior government official.

Godongwana is anticipated to reveal his decision on Tuesday, prior to the monthly fuel price adjustments scheduled to be implemented on Wednesday, according to an official who requested to remain anonymous due to the delicate nature of the issue.

Trade unions, business groups, and political parties are urging the government to take action as global energy prices surge in the wake of the US-Israeli conflict with Iran, resulting in increased local fuel costs.

Officials indicate that the government is contemplating actions akin to those taken in 2022, when it briefly reduced the fuel levy following the onset of Russia’s war in Ukraine. The reduction, which decreased prices by 1.5 rand per liter, was maintained for several months before it was gradually removed.

South Africa’s central bank has cautioned that increasing fuel prices present inflation risks, forecasting that fuel inflation may surpass 18% in the second quarter.

In the meantime, the rand has depreciated over 6% against the dollar since the onset of the Middle East conflict, intensifying the pressure on fuel prices.

South Africa, being significantly dependent on imported petroleum, continues to be susceptible to changes in global oil prices. Fuel prices are revised every month in accordance with global crude oil prices, exchange rates, and domestic taxes, with adjustments taking effect on the first Wednesday of each month.