SA stretches fuel tax relief as oil prices surge

The government will extend fuel tax cuts for another two months to cushion the impact of the Iran war on households, but that the relief would end after that and it would recoup the lost tax revenue in other ways.

The US-Israeli war against Iran has caused the biggest oil supply disruption in history, the International Energy Agency has said, hurting countries like South Africa that import most of their fuel as global energy prices have surged.

The government intervened in late March by announcing a one-month reduction in its general fuel levy for April and has now extended that relief into May and June.

In April, the levy was reduced by R3/l for petrol and diesel, whereas for May it will be lowered by R3/l for petrol and R3.93/l for diesel.

In June the relief will halve, to R1.50/l for petrol and R1.96/l for diesel, the finance and petroleum ministries said in a joint statement, saying the measure was aimed at addressing concerns of higher inflation and negative impacts on economic growth.

Diesel is one of the most consequential prices in the economy because it sits at the front of almost every supply chain. Trucks move freight on it, farmers run tractors and irrigation pumps on it, and backup generators burn it whenever the grid fails, which means a higher diesel price feeds directly into the cost of food, manufactured goods and just about anything that has to be shipped to a shelf.

Second-round inflation

Economists call this a second-round inflation effect: the initial fuel-price shock filters through to retail prices weeks or months later, often more stubbornly than the original spike, because once transporters and producers raise prices to cover higher input costs, they rarely cut them again when fuel eases.

For the telecommunications sector, diesel matters for a more specific reason. Mobile network operators run tens of thousands of base station sites across South Africa, and during or grid outages those sites stay on air only because diesel generators kick in.

Read: Government steps in as fuel shock hits

MTN and Vodacom have between them spent billions of rand on diesel in recent years to keep networks running through Eskom’s rolling blackouts, and the cost shows up directly in their network operating expenses, squeezing margins and, ultimately, putting upward pressure on data and voice tariffs.

A sustained diesel price increase therefore hits operators twice — once through the direct fuel bill at site level, and again through the broader inflationary environment that erodes consumers’ ability to spend on connectivity.

The government reiterated the fuel tax cuts would not affect the fiscal framework adopted as part of the 2026 budget, since foregone tax of R17.2-billion would be funded through a combination of higher-than-expected revenue and underspending.

South Africa’s central bank flagged fuel-driven inflationary risks at its monetary policy meeting in March and has since said market-implied interest rate expectations suggest scope for about two 25-basis-point hikes this year.  — Anathi Madubela, Sfundo Parakozov and Nilutpal Timsina, (c) 2026 Reuters, with additional reporting (c) 2026 NewsCentral Media