Cheaper petrol won’t save your wallet just yet, here’s why South Africans should stay cautious

Cheaper petrol won’t save your wallet just yet, here’s why South Africans should stay cautious

When petrol prices drop in South Africa, it usually feels like a small win in a long, expensive month. Filling up costs a little less, taxi fares don’t spike immediately, and there’s a brief sense that inflation might finally ease its grip.

But according to economists, that relief may be more psychological than real.

Despite a 65 cents-per-litre petrol price cut this week, the second reduction of the year, the impact on inflation is surprisingly limited. And with another budget speech looming, motorists may want to enjoy the breather while it lasts.

Why inflation isn’t falling as fast as petrol prices

South Africa’s inflation rate came in at 3.6% year-on-year in December, barely changed from November. Investec Chief Economist Annabel Bishop says January’s figure is expected to land at a similar level, before easing to around 3.0% by March 2026.

The late-2025 uptick, she explains, wasn’t driven by new price shocks but by base effects from 2024, essentially giving 2026 a higher starting point.

While fuel prices do matter, petrol carries a surprisingly small weight in the inflation basket. It makes up just 3.8% of the Consumer Price Index (CPI), meaning even a sizeable cut doesn’t move the needle much.

There’s another catch: about half of what South Africans pay at the pump is made up of taxes and levies. Those don’t change when oil prices fall or when the rand strengthens.

The rand helps, just not at the petrol station

One reason petrol prices have eased is the stronger rand, which firmed to around R15.76 to the dollar at the end of January, from R16.51 at the start of the year. That currency strength contributed roughly 28 cents of the latest petrol price cut, with the rest coming from lower international oil prices.

A stronger rand does help inflation elsewhere. Bishop notes that every 50-cent improvement against the dollar can shave about 0.1% off annual CPI inflation.

If the rand averages R16.50 for the year, inflation could sit around 3.1%. At R16.00, it could dip to 3.0%. A sustained move to R15.50 could even pull inflation below 3% in 2026 assuming nothing else changes.

And that’s the key caveat: things do change.

Food prices are the other big worry

Fuel isn’t the only inflation driver keeping economists awake at night. Food prices especially meat are flashing warning signs.

Meat inflation surged to 12.6% year-on-year in December, up sharply from negative territory a year earlier. The spike is linked to foot-and-mouth disease disruptions, and some analysts expect double-digit increases to persist until at least April 2026.

For households already juggling high electricity bills, school costs and transport expenses, rising food prices hit harder than fuel fluctuations.

More fuel taxes could be coming

The biggest risk to petrol prices may not come from global oil markets, but from Pretoria.

Fuel taxes were frozen between April 2022 and 2024, but that pause ended in the 2025 budget with a 15 cents-per-litre hike as National Treasury searched for revenue after shelving a planned VAT increase.

Now, with the 2026 budget set to be tabled later this month, economists warn that another fuel levy increase is possible. Bishop says higher fuel taxes could wipe out the roughly 30 cents-per-litre petrol price relief already building for March.

Sin taxes are also expected to rise, adding further upward pressure to inflation.

Enjoy the dip, but don’t count on it

For now, petrol is cheaper and inflation pressures remain moderate. But South Africans have been here before. Temporary fuel relief has a habit of vanishing just as quickly as it appears.

With taxes making up half the pump price, food inflation accelerating, and fiscal pressure mounting, the message is clear: lower petrol prices are welcome, but they’re no guarantee of lasting relief.