/ 23 March 2022

Plans to grant fuel price reprieve for April and May — Godongwana

New Finance Minister Enoch Godongwana Presents Mid Term Budget
Finance Minister Enoch Godongwana. (Dwayne Senior/Bloomberg via Getty Images)

The government will soon announce steps to grant South African consumers a two-month reprieve from soaring fuel prices driven by the war in Ukraine, Finance Minister Enoch Godongwana said on Wednesday.

He told parliament an announcement about the relief would be made within weeks, but declined to give further detail.

“I can’t reveal the details at this stage,” Godongwana said in response to a question from an opposition legislator.

“We are in a sensitive discussion with the DMRE [department of mineral resources and energy]. Clearly there is intention on the part of government to take immediate steps, in particular for April and May, to mitigate the impact of the price increases, even as a temporary measure during those two months.

“Some work is being done to attend to this challenge, particularly, even if it is on a temporary basis for the months of April and May.”

The measure was “urgent from a government perspective”, he said.

Mineral Resources and Energy Minister Gwede Mantashe earlier this month said he was in talks on the subject with Godongwana as Russia’s invasion of Ukraine began driving up the price of crude oil. The commodity was trading at $116 a barrel earlier on Wednesday, and fuel prices in individual countries are expected to soar.

The South African fuel price increased by R1.46 in late February, bringing it to more than R21 a litre, the highest it’s ever been. Mantashe said this was negating the fuel tax relief in the February budget in which Godongwana announced no new increases to the fuel levy or the Road Accident Fund levy. There have been warnings from industry participants that fuel it could reach R24 a litre.

The finance minister on Wednesday stressed that the government was mulling a restructuring of the fuel price before the conflict made urgent relief imperative.

“Prior to that, we were kind of dealing with two approaches: [firstly], a long-term approach which will take into account the review of 2018, and make sure that over the long-term horizon the price of fuel is made competitive,” Godongwana said.

“[Secondly, there is a short-term intervention, which must [address] how we cushion the [current] shock. So those are two components that we are talking about and one of those components is going to be announced in the next few weeks.”

Asked for his projection of the effect of the war on the South African economy, Godongwana said that because the conflict was still unfolding, the potential effects were very difficult to quantify with precision and confidence.

However, he said the trade between South Africa and both Russia and Ukraine was “very small”.

“It is less than 1`% of South Africa’s total export of foods and imports and, therefore, it is minimal.”

In certain industries however, the trade exposure was more significant. These included export of citrus, apples and pears. 

“More challenging would be an indirect impact via the financial flows of different countries, via the impact as I have been saying on inflation, via … our commodity exports. So, at this stage, we cannot predict with precision,” Godongwana said.

Steve Swart from the African Christian Democratic Party said the fiscal risk of supply-chain bottlenecks leading to sustained price pressures and rising inflationary expectations — which the budget review warned about — was coming to pass.

Given the shock price increases faced by local consumers, Swart wanted to know whether the treasury would consider using the country’s higher-than-expected revenue collection of some R71-billion to give taxpayers a temporary reprieve, or suspending a portion of fuel taxes and levies for a set period. The levy makes up almost a quarter of the pump price.

In reply, Godongwana reiterated his initial statement.

“The issue of cushioning the impact of the fuel price is a matter which is being given urgent attention in government, and, therefore, we will make the necessary announcement soon because it is our intention that such mitigation measures must focus on April and May,” the finance minister said.