South Africa may be on the verge of departing from its long-established system of adjusting fuel prices on a monthly basis, after a suggestion was put forward to introduce fortnightly price reviews instead, aimed at responding more effectively to sudden swings in international oil markets. The idea was tabled by Fasiha Hassan-Duma during a sitting of Parliament’s Portfolio Committee on Mineral and Petroleum Resources, as MPs considered ways to shield consumers and businesses from the harsh effects of sudden fuel price increases.
Key Takeaways
- Fortnightly pricing proposed: Fasiha Hassan-Duma has suggested South Africa move from monthly to two-weekly fuel price reviews, allowing quicker responses to volatile global oil prices.
- War-driven price shocks: Since conflict broke out in February, petrol and diesel prices surged sharply, and despite recent cuts, both remain well above pre-war levels, straining households and businesses.
- Economic ripple effects: Rising fuel costs have driven up food and logistics prices, weakened SME confidence, and threatened the viability of petrol stations, prompting calls for a more responsive pricing system.
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Background to the Fuel Price Crisis
This debate emerged in the wake of one of the steepest fuel price surges witnessed in recent memory. Once conflict broke out towards the end of February, the cost of petrol rose by R6.53 a litre between March and May, whilst diesel prices shot up by an even steeper R13.43 a litre over the same stretch.
By June, there was a measure of respite for diesel users, as wholesale prices were trimmed by R2.62 a litre, though petrol consumers were not so fortunate, with prices climbing by a further R1.43 a litre once Treasury’s relief measures came to an end.
July marked the first month in which both petrol and diesel prices were reduced simultaneously, even though the Treasury relief had fallen away entirely, with petrol dropping by R1.96 a litre and diesel falling by R3.59 a litre.
Even with this reversal in trend, petrol remains R6.00 a litre costlier than it was before the outbreak of war, whilst diesel is still sitting at R7.22 a litre above pre-war levels.
Should the preliminary forecasts for August prove accurate, prices are expected to edge closer to where they stood before the conflict began, although they would still be roughly R3.50 a litre above February’s levels.
Motorists wanting to track how local fuel prices might move can follow global Brent crude oil prices and the rand-to-dollar exchange rate, since both feed directly into South Africa’s monthly fuel price calculations, usually announced a few days before the start of each new month.
Month-by-Month Fuel Price Movements
| Period | Petrol Price Change | Diesel Price Change | Notes |
|---|---|---|---|
| March to May | +R6.53 per litre | +R13.43 per litre | Sharp increase following outbreak of war at end of February |
| June | +R1.43 per litre | -R2.62 per litre | Treasury relief on petrol ended |
| July | -R1.96 per litre | -R3.59 per litre | First month with cuts for both fuels despite full end of Treasury relief |
| August (projected) | Prices expected to fall closer to pre-war levels | Prices expected to fall closer to pre-war levels | Still projected to be around R3.50 per litre higher than February |
Wider Economic Impact of the Fuel Price Shocks
Given that South Africa depends so heavily on diesel to power its transport networks, freight operations and agricultural activities, the sudden spike in fuel costs set off considerable cost-push inflation across food production, fertiliser supply and general logistics chains throughout the supply network.
Pressure on Small Businesses and Fuel Retailers
The strain has also been keenly felt among smaller businesses, a trend that was highlighted in the Business Partners SME Confidence Index.
According to this index, a considerable number of small and medium-sized enterprises found themselves shifting their focus away from growth and expansion, and instead concentrating on managing escalating operating costs simply to keep their businesses afloat, which in turn contributed to a decline in overall business confidence.
In addition, the Fuel Retailers Association raised concerns that repeated fuel price shocks were placing the long-term viability of petrol stations at risk, pointing to the combined pressures of fixed profit margins, growing working capital requirements and falling sales volumes.
These conditions have reportedly pushed some fuel station operators to contemplate cutting back on their trading hours or retrenching staff, simply in order to stave off the threat of bankruptcy.
Petrol stations in South Africa typically earn a regulated retail margin per litre sold, which is set by government rather than determined by competition between stations, meaning that when volumes drop due to high prices, station owners cannot easily recover lost income by raising prices further.
Details of the Proposed Bi-Weekly Pricing System
According to Fasiha Hassan-Duma, a Member of the National Assembly of South Africa, adjusting fuel prices every two weeks instead of once a month would allow government to respond more swiftly to fluctuations in global oil prices.
These concerns were raised during a sitting of the Portfolio Committee on Mineral and Petroleum Resources, held against the backdrop of the ongoing fuel price crisis.
Committee members cautioned that the knock-on effects of rising fuel costs are felt throughout the broader economy, explaining that when fuel prices go up, this inevitably drives up the cost of food and other basic necessities, with the heaviest burden ultimately falling on the poorest members of society.
Members of the committee also took issue with the manner in which government communicated during the crisis, suggesting that the resulting uncertainty effectively brought about an artificial shortage in supply, as nervous motorists rushed to fill up their tanks out of concern that prices would rise even further.
In order to lessen the blow of future price shocks, Hassan-Duma put forward a proposal to move away from the current system of monthly fuel price adjustments, in favour of reviewing prices once every fortnight instead.
Hassan-Duma explained that although South Africa has no ability to influence global oil prices directly, the country does have the power to alter how it responds to sudden fluctuations, simply by adjusting local fuel prices on a more regular basis.
She acknowledged that this is fundamentally a global and international issue, but maintained that there remain a number of practical interventions that could be introduced, which she believes ought to be pursued.
How the Fortnightly System Would Work
Rather than pushing through a full price increase all at once, Hassan-Duma suggested that prices should instead be reviewed every two weeks, meaning that increases could be introduced in smaller, staggered portions.
She illustrated this by explaining that instead of raising diesel prices by R10 or R7, or whatever figure might be required, all in a single month, the increase would not be implemented immediately in full, and prices would instead be reviewed on a fortnightly basis rather than monthly.
She described a system in which a price would be set for one two-week period, followed by a separate price for the following two-week period, given how rapidly the price of crude oil can shift on the international market.
Hassan-Duma maintained that although South Africa has very limited influence over the international forces driving oil prices, the country is nevertheless in a position to adapt more rapidly to shifting market conditions.
She noted that even where a price increase might prove severe within the space of only twenty-four hours, there would still be an opportunity to reassess that price again within a fortnight, adding that this approach could potentially allow prices to be brought down again by a rand or two thereafter.
Anticipated Benefits and Challenges
Hassan-Duma conceded that rolling out a system of bi-weekly price adjustments would likely bring about certain challenges of its own, though she was of the view that the advantages on offer would ultimately outweigh these drawbacks.
She explained that while such a change would undoubtedly create some difficulties, it would nonetheless help to manage the underlying problem somewhat more effectively, would introduce a more staggered and gradual approach to price changes, and would demonstrate that government is genuinely responsive to the hardships being experienced by ordinary people.
She further suggested that adopting a more flexible pricing framework could help to soften the blow of rising fuel costs on households, whilst also easing some of the pressure created by the broader cost-of-living crisis.
According to Hassan-Duma, such a system could therefore assist in managing a cost-of-living crisis that is expected to worsen considerably, with working-class and lower-income South Africans likely to be affected the most.
Awaiting the Department’s Response
No further specifics were provided regarding how the proposal might be implemented in practice. BusinessTech has approached the Department of Mineral and Petroleum Resources for comment on whether it intends to give this proposal any consideration, and this article will be updated with the department’s response as soon as it becomes available.
Conclusion
The proposal to shift South Africa’s fuel pricing system from monthly to fortnightly reviews reflects growing concern over how prolonged price shocks have strained households, businesses and the broader economy since the outbreak of war. While Hassan-Duma has acknowledged that such a change would bring its own challenges, she has argued that a more staggered, responsive approach could ease the burden on consumers, particularly the working class and the poor, whilst better reflecting the volatility of global oil markets. With no formal response yet from the Department of Mineral and Petroleum Resources, it remains to be seen whether this proposal will translate into actual policy change, though it has already sparked meaningful debate about how South Africa manages fuel price adjustments going forward.
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