Bad news about petrol prices in South Africa

South African motorists will experience relief at the pumps next week, with petrol and diesel prices expected to come down. 

However, an increase in the General Fuel Levy will effectively eliminate any cuts to petrol prices, with diesel still seeing a small cut.

The fuel price cuts are primarily due to the rand strengthening versus the dollar over the past month, as the Government of National Unity (GNU) appears to have survived the Budget debacle. 

The dollar has also weakened in recent weeks, as US President Trump continues to impose severe tariffs on trading partners, only to reverse them or delay their implementation days later. 

The oil price has remained relatively flat over the past month, declining sharply in April after Trump first imposed tariffs on ‘Liberation Day’. 

South Africa’s Central Energy Fund (CEF) tracks all these changes to forecast the impact the price of fuel in the country. 

The CEF’s latest data indicates the following changes for the price of petrol and diesel next month –

• Petrol 93 – decrease of 19 cents per litre
• Petrol 95 – decrease of 19 cents per litre
• Diesel 0.05% – decrease of 50 cents per litre
• Diesel 0.005% – decrease of 50 cents per litre

With the oil price remaining relatively flat, the declines in the price of petrol and diesel have largely been driven by the strength of the rand versus the dollar. 

South Africa’s currency has been on a six-week advance versus the dollar, with it hitting a five-month high on 23 May. 

This came after the GNU survived the Budget debacle, with the third iteration from the Finance Minister gathering sufficient political support. 

The rand also managed to hold its own after President Ramaphosa met with his US counterpart on the same day as the Budget Speech to reset relations between the countries. 

“It surprised quite a lot of market observers that the rand demonstrated such resilience over the past several days,” Phoenix Kalen, head of emerging-market research at Societe Generale, told Bloomberg. 

“But at the end of the day, the market deemed that the trading details at stake are a much less important driver than South Africa’s relationship to China and the performance of key commodity prices.”

However, these cuts come with a catch, as petrol prices are likely to increase following the announcement of an inflation-linked increase in the General Fuel Levy in the Budget on 21 May. 

Finance Minister Enoch Godongwana explained that this is necessary to limit the impact of the reversal of the planned VAT hike. 

This will be the first fuel levy increase in three years, with the government opting to keep the levy flat to ease the financial pressure on households.

“It means from the fourth of June this year, the General Fuel Levy will increase by 16 cents per litre for petrol and by 15 cents per litre for diesel,” Godongwana said. 

This will make the General Fuel Levy R4.01 per litre for petrol at the pump and R3.85 per litre for diesel from 4 June. As a result, taxes will make up 29.9% of the price of petrol and 33% of the price of diesel at the pump.

The tax hike will effectively eliminate the forecasted cut in the price of petrol and leave diesel with a significantly smaller reduction of around 35 cents per litre.