Temporary R3 fuel levy cut raises long-term economic questions

While South Africans are breathing a sigh of relief at the pumps following the government's last-minute announcement to temporarily lower the fuel levy, what the loss means for the economy remains to be seen.

On Tuesday, Finance Minister Enoch Godongwana said he would lower the fuel levy to cushion consumers from skyrocketing fuel prices. 

The intervention is set to be in place for one month and would be re-evaluated thereafter. 

RELATED: Godongwana announces temporary R3 fuel levy cut to ease consumer pressure

Maarten Van Doesburgh, Head of Economics at the Cape Peninsula University of Technology (CPUT), said that he does not see the fuel levy cut being extended beyond April.

"The fiscus is losing R6 billion by cutting the fuel price by R3 per litre for this month. We don't have the room to extend it beyond April."

He added that further extensions will depend on South Africa's financial situation.

"Those indirect taxes have to be recovered through other measures. So, what we're not paying now, we will be paying in the future somehow."

While petrol saw a R3.06 per litre increase, diesel saw an increase of over R7, and the price of illuminating paraffin jumped by R11,67.

Van Doesburgh explained that this will hit lower-income South African households the hardest.

"About two million South African households still rely on paraffin.”

He emphasised the importance of the government reducing the country’s reliance on imported fuel, as it remains vulnerable to global market fluctuations.

He noted that even if the Middle East conflict ends, fuel prices will not come down immediately.

"We're dependent on refined fuel, and even though we purchase a lot of our crude from Angola and Nigeria, we are still very dependent on the import of refined fuel."

To listen to Van Doesburgh in conversation with CapeTalk’s Lester Kiewit, use the audio player below: