South Africa revives fuel levy cuts as stronger finances create room for relief

South Africa will reintroduce temporary fuel levy cuts for two months from November, Finance Minister Enoch Godongwana said on Wednesday, in a 10 billion rand ($609 million) effort to ease cost-of-living pressures. Godongwana ‌said the levy would be reduced by 3 rand a litre on diesel and 1.50 rand on petrol from November 4 to December 1, with smaller reductions of 1.50 rand and 1 rand respectively remaining in place until January 5.

The measure revives temporary fuel levy cuts introduced from April to June after oil prices ‌surged amid conflict in the Middle East. South Africa imports most of its fuel, leaving it exposed to swings in global energy prices.

"Because we have rebuilt ‌fiscal buffers, government is in a stronger position to respond, including by providing temporary fuel levy relief again," Godongwana said in his mid-year budget speech. "This intervention will help ease cost of living pressures without compromising the sustainability of the budget."

South African motorists pay about $6.95 for the equivalent of a US gallon of petrol, roughly 62% more than the US average of about $4.28 a gallon. The ⁠mid-term budget ​showed this fiscal year's consolidated budget deficit ⁠was now projected at 3.9% of gross domestic product, slightly below the 4.0% forecast in February.

Africa's most industrialised economy has struggled for years with weak growth, rising debt and mounting debt-service ⁠costs, but the mid-term review pointed to an improving fiscal position despite heightened global uncertainty. IMPROVED FISCAL POSITION

The Treasury reported a 54.1 billion rand revenue overrun and said the additional funds ​would be used to support infrastructure projects, ease spending pressures, increase reserves and pay down debt. South Africa has maintained a main budget primary ⁠surplus, where revenue exceeds non-interest spending, since 2023, while economic growth is forecast at 1.2% this year, down from 1.6% projected in February.

The Treasury said plans to introduce a principles-based fiscal anchor law in ⁠2027 ​would strengthen the foundations for future growth. The anchor would centre on fiscal sustainability, defined as the state's ability, under reasonable macroeconomic and fiscal assumptions, to meet current and future spending and debt-service obligations while managing fiscal risks.

Under the proposed framework, future administrations would be expected to present a fiscal plan setting out ⁠objectives, strategy, key assumptions and risks, and explain how policy choices support fiscal sustainability. The framework would be introduced through amendments to public finance management legislation.

The Treasury ⁠said implementation of its fiscal strategy ⁠had helped restore confidence in the public finances, pointing to positive actions by all three major credit ratings agencies despite heightened geopolitical uncertainty. Reforms to state-owned companies Eskom and Transnet, as well as improvements in municipal management, remain priorities.

($1 = 16.4205 rand)