South Africa’s R3 petrol price relief comes at a huge cost

The R3-per-litre fuel price relief measure implemented by the government at the start of April will need to be repaid, one way or another.

The day before April’s fuel price hikes, the government announced that it would temporarily reduce the General Fuel Levy (GFL) by R3 in order to soften the blow to consumers.

However, the National Treasury made it explicitly clear that this policy would be budget-neutral, which means the government will look for a way to make up the lost revenue.

The treasury noted that the relief measure cost the fiscus approximately R6 billion, adding to the country’s budgetary debt.

The GFL reduction will only last until the start of May. While motorists and industry sectors have called on the government to extend the relief measure, this is unlikely to happen.

Even if it is extended, it will mean another R6 billion in lost revenue for the state, delaying the inevitable effects of inflation.

This is according to Investec Chief Economist Annabel Bishop, who warned that the longer the US-Iran war continues, the worse local inflation will be.

This, in turn, will lead to interest rate hikes as the South African Reserve Bank (SARB) moves to its 3% target.

Bishop noted that the current fuel price under-recoveries predicted for May would add 0.6% month-on-month to CPI inflation.

This 0.6% m/m contribution to CPI inflation would push May’s CPI inflation rate to 4.2% y/y, instead of the 3.7% y/y currently forecast, she said.

It’s important to note that the current fuel price under-recoveries are based on data from the Central Energy Fund, which is continually adjusted throughout the month.

As of mid-April 2026, petrol is expected to increase by between R2.29 and R2.63 per litre next month, while diesel is facing a hike of between R8.06 and R8.07 per litre.

For the quarter, CPI inflation would be 4.0% year-on-year, a 0.5% increase from the current take.

Bishop estimates that this will lead to a 25bp hike to interest rates in May, instead of in July as Investec currently forecasts.

“The Forward Rate Agreement curve currently indicates a full chance of a 25bp hike in the repo rate in May now, having risen from last week when the ceasefire was announced between the US and Iran, and a hike in July was anticipated instead,” she said.

“That is, market expectations, which are very changeable, have now brought forward the interest rate hike expectation from July to May.”

Bishop noted that the R3-per-litre cut for petrol and diesel this April will be fed back into the system.

This will either take the form of a fuel price hike, or the removal of part/all of a future fuel price cuts, keeping inflation elevated.