Government weighs fuel relief as consumers struggle with rising costs

The government is giving “serious consideration” to further fuel price interventions, but any relief for motorists and businesses would have to be weighed against the cost to the state and the potential impact on funding for other departments.

This, according to President Cyril Ramaphosa, who spoke to the media on the sidelines of the Bana Pele Leadership Summit in Johannesburg on Monday.

His comments come as all eyes shift to his Finance Minister, Enoch Godongwana, who is expected to deliver the Medium-Term Budget Policy Statement (MTBPS) on Wednesday.

It is at this mini-budget that South Africans will be provided with a clear path forward.

ALSO READ | Expert warns fuel hikes could deepen cost-of-living pressureRamaphosa explained that the government has already spent billions when it previously moved to cushion consumers from unprecedented fuel price hikes. He said more intervention would depend on how much fiscal space the Treasury has to move around.

Mere moments before announcing the historic fuel hike for consumers in April, the Department of Mineral Resources and Treasury said it would temporarily reduce the fuel levy by R3 per litre.

The Department then halved the reduction for the month of June before removing any subsidy completely.

This relief resulted in at least R17.2 billion in foregone tax revenue.

Congress of South African Trade Unions (Cosatu) parliamentary coordinator Matthew Parks said the federation is, amongst other things, hoping to hear an announcement of the government’s plans to cushion consumers from “the suffocatingly high price of fuel” during the Minister’s budget speech tomorrow.

Parks said South Africans simply cannot be left to bear the escalating cost of living without government intervention as the war in the Middle East has spiked inflation, triggered two repo rate hikes, and pushed workers deeper into poverty.

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This MTBPS cannot be business as usual, nor can we afford to continue to normalise the abnormal. 

“Government must signal a bold shift to stimulate growth, rebuild public and municipal services, provide relief to workers and the poor, and give hope to the nation,” Parks said.

Along with addressing the sharp rise in fuel prices, the union anticipates the minister to prioritise rebuilding the state’s capacity, fixing local government, enhancing law enforcement’s capabilities, and tackling delays affecting infrastructure projects.

In terms of the broader economy, PSG chief economist Johann Els expects an MTBPS that will showcase increased revenue collection and conservative spending, which may result in ratings upgrades later this year or early next year by Moody’s and/or Standard and Poor’s (S&P).

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Els said the steady progress on policy and structural reforms combined with improving fiscal discipline cements the country’s path towards a lower debt-to-GDP ratio and that it could be back in investment-grade territory within the next two to three years.

However, he cautioned that the short-term outlook is less promising.

Els explained that Treasury would be reluctant to offer further fuel levy relief, as the April to June relief had already cost R17bn, and the department would likely exercise caution over whether recent windfalls could be sustained.