South Africa’s blue-collar workers, who already spend a disproportionate amount of their earnings on transport costs, could be in for more pain as the taxi industry mulls new fare hikes.
Record fuel increasesprompted by a surge in oil prices which are being propelled by the ongoing Middle East war are threatening the sector’s viability.
Data shows most people are housed 40km from employment opportunities. As a result, they spend more than 40% of their income on transport. These expenses are expected to balloon should taxi fares rise.
Fuel has about 4.5%–5% weighting in the consumer price index basket.
The South African National Taxi Council (Santaco), the national body representing the minibus taxi industry, said it is closely monitoring developments in the Middle East and their effect on fuel prices.
“The council is gravely concerned that, should fuel prices rise significantly as projected, there is a strong likelihood of losing patronage,” Santaco spokesperson Rebecca Phala said.
“This is because increases in public transport costs could make services less affordable, potentially driving commuters away from our services.
“Taxi fares are determined solely at the discretion of taxi associations. Given the current climate, it is highly likely that, if fuel prices increase substantially, associations will need to consider adjusting fares accordingly. However, these decisions will be made independently by each association.
“The taxi industry remains the largest transporter of South Africans using daily commuter services. While figures may fluctuate, data indicates that about 15-million South Africans rely on taxi services each day for travel to work, school and other essential activities.”
The imminent record monthly hike in the fuel price comes amid dwindling consumption. Petrol and diesel consumption in South Africa has declined by 5.8-billion litres since 2015, shedding billions of rand in lost revenue and putting pressure on the country’s more than 4,600 garage forecourts to stay afloat.
The plunge in consumption was worsened by the outbreak of Covid-19 in 2020, which caused companies to adopt hybrid work models.
The government is facing mounting pressure to temporarily suspend planned fuel levy increases as the escalating war between the US and Israel against Iran drives global oil prices higher.
Business Leadership South Africa (BLSA) and Cosatu are calling on the government to temporarily suspend or reduce the fuel levy to cushion the economy from the April fuel price hikes. BLSA is also urging a delay on the new fuel tax increases announced in the February budget.
From April 1, the general levy for petrol will increase by 9c/l and 8c/l for diesel. The carbon fuel levy will increase 5c /l for petrol and 6c/l for diesel, and the Road Accident Fund (RAF) levy goes up 7c/l.
BLSA has called on the government to delay the fuel levy as its most immediate economic stabiliser, drawing a direct comparison to emergency measures taken at the outbreak of the Russia-Ukraine war in 2022 when authorities temporarily cut the levy to cushion consumers and businesses.
“The tax lever is therefore the most immediate lever to pursue, but it can only be temporary so as not to damage our fiscal position, BLSA CEO Busi Mavuso said in her weekly newsletter.
“The fuel taxes announced in the February budget can be delayed. Unfortunately, our strategic oil reserves are not in a state to support any solutions — South Africa’s strategic stocks are small — about two to three weeks’ worth against the global 90-day benchmark, and the country’s reduced refining capacity limits how much relief they could realistically provide.
“Longer term, we must deliver supply diversification, better stock management and refinery logistics.”
The call comes as Brent crude benchmarks respond to heightened geopolitical risk in the Strait of Hormuz, a critical chokepoint for global oil flows, with fears among market watchers that any further sustained blockade or military escalation could trigger price shocks.
Cosatu, the country’s largest trade union federation, has also warned that without government intervention in April the fuel increases would be disastrous for workers and the broader economy.
“Cosatu demands urgent action by the government to cushion society from the massive fuel price hikes due to come into effect from the beginning of April,” Cosatu’s Matthew Parks said.
“Whilst appreciating the very limited fiscal space of the state, the Treasury’s public statement that ‘there is nothing they can do’ is simply unacceptable and a shocking abdication of leadership and responsibility to cushion society, in particular the working class, and the economy from the spillover of the latest war … in the Middle East.”
PSG Financial Services chief economist Johann Els said, “Treasury could potentially cut the fuel levy for a limited time to ease the pressure on consumers. The budget assumptions were very conservative around mining tax revenues. They could thus have room within the existing budget parameters, without damaging the deficit and debt ratios.”