South African motorists to see fuel price reduction from Thursday due to temporary excise duty cut

South Africans have received long-awaited support from the Ministry of Finance, as Finance Minister Enoch Godongwana announced measures to ease the fuel burden, which will take effect on November 4th. During his Medium-Term Budget Policy Statement presented to Parliament on Wednesday, Godongwana announced a temporary reduction in the overall fuel levy.

This means that from November 4th to December 1st, a tax deferral of 3 rand will be provided for diesel and 1.50 rand for petrol. Subsequently, until January 5th, these amounts will decrease to 1.50 rand for diesel and 1 rand for petrol.

How will this affect pump prices?

Due to the volatility of global oil prices, including a recent surge, it is difficult to accurately forecast fuel price adjustments in November. However, the latest data from the Central Energy Fund shows a more optimistic outlook compared to the beginning of the month.

Although the latest CEF report still indicates accumulated shortfalls of between 1.37 and 1.46 rand for petrol, there has been a slight over-receipt in recent days. If this trend continues, the increase is likely to remain below the 1 rand per litre mark, leading to a fuel price decrease of 50 cents or more after accounting for the tax deferral.

Diesel prices also look more encouraging. Current forecasts suggest a possible increase of approximately 1.25 rand per litre, although it may rise slightly by the end of the month if international prices remain at current levels. Nevertheless, diesel drivers may still see a price drop of 1.50 rand or more per litre.

With the implementation of the above forecasts, petrol prices in November are expected to range from 28.88 to 29.75 rand per litre, while diesel should cost between 29.58 and 31.30 rand per litre at wholesale, depending on grade and location.

While this deferral should help mitigate rising transport costs, which have increased by more than 10% year-on-year according to the latest Consumer Price Index (CPI), the long-term outlook for fuel prices remains bleak. If the conflict in the Middle East is not resolved by the end of the year, South Africans may face record fuel prices again in January.

The Tank Still Costs Hundreds More

Following the sharp price increases in October, a litre of unleaded petrol 95 currently costs 29.38 rand on the coast and 30.25 rand in Gauteng. This is 8.80 rand more than a year ago. Consequently, a 40-litre tank now costs approximately 350 rand more than a year ago.

Diesel has also reached record levels: the wholesale price for 500ppm is currently 31.08 rand on the coast and 31.95 rand inland, while 50ppm is 31.93 and 32.80 rand respectively. Retail prices, depending on the point of sale, are likely to fluctuate between 33 and 35 rand.

Even with the 1.50 rand deferral in November, South Africans will still pay over 30 rand at the pump for diesel.

Over the year, the price for 500ppm has risen by 12.57 rand. A 70-litre tank now costs 880 rand more.

Calls for Permanent Improvements

The National Association of Automobile Dealers welcomed the temporary fuel tax deferral but stated that these measures must lead to sustainable improvements in affordability for households. NADA Chairman Brandon Cohen stated: 'Fuel costs affect household budgets, business expenses, and mobility access. The temporary reduction in levies will provide some relief for drivers and businesses dependent on vehicles for their livelihood.'

Cohen noted that these measures acknowledge the pressure that transport costs place on the broader economy, including public transport users and businesses involved in goods transportation and service provision. He added: 'Affordability goes far beyond the purchase price of a vehicle. Consumers must consider loan repayments, fuel, insurance, and maintenance alongside other household expenses. Reducing the fuel levy helps with one of these cost components, but sustainable improvements require higher household income, job growth, and reduced pressure on daily expenses.'

The South African National Taxi Council (SANTACO) also endorsed the announcement of the temporary fuel relief, calling it a positive step towards reducing the financial pressure currently felt by the transport sector. The council also assured passengers that there would be no immediate fare increases related to fuel while the industry continues to engage with the government in search of more sustainable, long-term support measures.

Although Botswana sources most of its fuel from South Africa, drivers in the country pay a lower price for gasoline, according to a comparison published by BusinessTech on October 20. This comparison focuses on individual pricing decisions and applicable levies in each country, rather than solely on the fuel source.

According to the publication, the price of AI-95 gasoline in Botswana is P18.21 per liter, while the domestic price in South Africa reaches R30.25. Using the exchange rate employed in the comparison (P1 to R1.20), the price in Botswana converts to R21.85 when rounded to the nearest cent.

For South African drivers, this comparison comes after another significant price hike. The government announced an increase in the price of AI-95 gasoline by R3.33 per liter starting October 7, citing rising international product prices and supply shortages.

The statement also mentioned uncertainty regarding oil flows through the Strait of Hormuz, increased transportation costs, and dwindling reserves. A slight strengthening of the rand against the dollar could not offset these factors.

World Bank trade data shows that South Africa is the leading source of fuel imports for Botswana in 2023, followed by Namibia and Mozambique. However, this historical trade ranking does not mean that both countries must set identical prices for drivers today.

South Africa adjusts regulated fuel prices monthly. The official announcement explains that the calculation takes into account imported crude oil and finished products, international prices, and import costs such as freight.

Botswana has its own regulator and makes pricing decisions. BusinessTech reports that the Botswana Energy Regulatory Authority last reduced fuel prices in July, and that the reinstatement of several levies in October did not lead to an immediate rise in the retail price.

These levies included a fuel levy, a road fund levy, and a supply assurance margin. In its recovery report, The Farmers’ Platform stated that the government would direct the collected revenues to strengthen Botswana's National Oil Fund to support consumers.

The Regulator, quoted by BusinessTech, explained how future pump price decisions will be made: 'Any future adjustment to pump prices will be determined through an established fuel price adjustment mechanism, taking into account prevailing international fuel prices, exchange rate fluctuations, accumulated surpluses or deficits, and other relevant market factors.'

The type of gasoline, the date of pricing, and the exchange rate influence the comparison, affecting savings in rands. Location is also important: the South African figure used here refers to domestic prices, not the price applicable at every petrol station across the country.

This distinction also applies to diesel fuel. The benchmark wholesale price for diesel fuel in South Africa is not the final retail amount that a driver necessarily pays, so comparing it to the price at a foreign station does not establish an equivalent cash saving.