The magnitude of the global energy price shock to the economy makes an extension of the partial petrol and diesel relief to further mitigate the impact of negative global developments inevitable and desirable. 

Prof. Raymond Parsons, economist from the North-West University (NWU) Business School, says the decision by the government to extend the fuel levy relief is not only necessary on social grounds, but also because identifiable fiscal space exists for a flexible financial response through higher-than-expected tax revenues, combined with promised spending reviews. 

“This is in line with what most countries have found to be essential to do in an effort to mitigate the impact of soaring fuel costs on their economies. The estimated total cost to the Treasury of the relief of R17,2 billion by June is affordable up to a point.”

Prof. Parsons explains that, as the government announcement confirms, the dashboard of the 2026 Budget need not change. He says as a rough estimate, the supportive measures could shave about 0,2% off headline inflation in the coming months. Fuel costs will still rise significantly, depending on how long the global oil price remains highly elevated. 

“Market confidence will be retained as long as extended assistance is predicated on the assurance that public finances in South Africa will basically remain fiscally neutral, even as fiscal priorities are revisited. Available fiscal space nonetheless needs to be critically interrogated.”

According to Prof. Parsons, in these acute and uncertain global circumstances, the trade-offs needed to strike the right balance inevitably call for difficult but unavoidable policy decisions. 

“In managing the new geopolitical economic challenges, it therefore remains possible for South Africa to deal with the global energy shock in ways that need not jeopardise fiscal credibility. These include the urgent overhaul and reform of the fuel price regulatory structure by the ministerial task team coordinating the  response of the government holistically to mitigate the impact on the cost of living, fuel and food security. Timelines should be set to finalise this review,” Prof. Parsons concludes.