Fuel Prices Expected to Drop Next Week Despite Levy Increase

South African motorists and freight operators can expect a modest reduction in fuel prices next week, despite an announced increase in the general fuel levy effective 4 June 2025.

In his budget speech on 21 May, Finance Minister Enoch Godongwana announced the first increase in the general fuel levy in three years, raising it to R4.01 per litre for petrol and R3.85 per litre for diesel. This adjustment aims to address the fiscal shortfall created by the removal of previous VAT hikes.

The Road Accident Fund levy remains unchanged at R2.18 per litre, and the carbon fuel tax levy maintains the 3 cents per litre increase that was applied in April.

While the levy increase would typically drive fuel prices upward, month-end data from the Central Energy Fund (CEF) reveals a substantial over-recovery in fuel pricing. The over-recovery results from a stronger rand against the US dollar and a decline in global oil prices, which have both helped stabilize and reduce the local cost of fuel.

The CEF’s projections indicate the following expected price changes before factoring in levy increases:

• Petrol 93 and 95: decrease of 20 cents per litre
• Diesel (0.05% and 0.005% sulphur content): decrease of 52 cents per litre
• Illuminating paraffin: decrease of 56 cents per litre

After incorporating the forthcoming fuel levy increases, the adjusted projections show:

• Petrol 93 and 95: decrease of 4 cents per litre
• Diesel (both grades): decrease of 37 cents per litre

This means that even with the tax hikes, end-users can anticipate a slight reduction in petrol and diesel prices next week, assuming no other pricing adjustments are introduced.

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The South African Reserve Bank (SARB) has acknowledged that declining fuel prices have contributed to lowering inflation below the central bank’s target range, allowing for a recent 25 basis point interest rate cut. Lower fuel prices are critical in easing the country’s cost-of-living pressures, particularly for transport and logistics sectors heavily reliant on fuel.

The rand’s relative strength against the dollar has been a significant factor in the over-recovery, supported by the dollar’s global weakness. However, the rand has weakened against other major currencies. Globally, oil prices have decreased approximately 15% since the beginning of 2025, though volatility remains due to geopolitical tensions and fluctuating supply-demand dynamics.

The Department of Petroleum and Mineral Resources is expected to announce the official fuel price adjustments shortly before they take effect on Wednesday, 4 June 2025.

While the increase in the general fuel levy presents an additional cost component, current market conditions will enable a net reduction in petrol and diesel prices next week, providing some financial relief for both consumers and commercial operators in the trucking industry.