South Africa has temporarily reduced its fuel tax by three rand per litre to cushion the impact of a global oil price surge. The move comes as pump prices rose in the country, with diesel prices increasing by over 40 percent and petrol prices rising by about 15 percent. Paraffin, widely used by lower-income households, will surge by 93 percent. The government said the measure will cost about six billion rand in foregone revenue, but will be offset by losses recouped elsewhere.
Finance Minister Enoch Godongwana expressed uncertainty about how the government would find the money to compensate for the lost revenue. A proposal to increase value-added tax earlier this year caused divisions within the unity government. The government has promised to implement a broader package of measures to support households and key sectors of the economy.
Unlike many regional peers, South Africa has managed to avoid widespread fuel queues. However, some stations have reported running dry as motorists rushed to fill up ahead of the price hikes. Minibus taxis, the country's main form of public transport, have threatened to hike fares in response to the price increases.
The South African government's decision to temporarily reduce fuel tax highlights the country's precarious economic situation. The fact that diesel prices are increasing by over 40 percent and petrol prices by 15 percent suggests that the government's measures may not be enough to mitigate the impact of the global oil price surge on ordinary citizens.
