A petrol attendant refuels a red vehicle at a filling station, illustrating the impact of fuel prices on motorists and household transport costs in South Africa. Photo: IOL

NNA News - South Africa has cut its economic growth forecast for 2026 to 1.2 per cent and announced R10 billion in temporary fuel levy relief, as the government seeks to cushion households and businesses against rising energy costs and a weaker global outlook.

Finance Minister Enoch Godongwana announced the measures in Parliament on Wednesday while presenting the Medium-Term Budget Policy Statement. The growth forecast is down from the 1.6 per cent projected in February, with the economy expected to expand by 1.6 per cent in 2027 and 2 per cent by 2029, according to the National Treasury.

“Domestic economic activity has already lost some momentum, especially in export-linked sectors,” Godongwana said in his budget statement.

He warned that prolonged conflict in the Middle East and the potential effects of El Niño on production costs and output could further weaken economic performance. Disruptions to global oil supplies have also increased energy prices and borrowing costs.

The government will temporarily reduce the general fuel levy by R3 per litre for diesel and R1.50 per litre for petrol from 4 November to 1 December. From then until 5 January 2027, the reductions will fall to R1.50 per litre for diesel and R1 per litre for petrol.

“These measures will provide R10 billion in support, at a fiscal cost of R10 billion in foregone revenue,” Godongwana said.

The relief will be funded by returning R10 billion previously transferred to the Central Energy Fund to the National Revenue Fund, with the money placed in the contingency reserve to finance the intervention.

Godongwana said the government’s improved fiscal position had created room to respond to rising costs.

“Because we have rebuilt fiscal buffers, government is in a stronger position to respond, including by providing temporary fuel levy again,” he said.

He added: “This intervention will help ease cost of living pressures without compromising the sustainability of the budget.”

Despite the weaker growth outlook, the government reported improvements in its public finances. The consolidated budget deficit is now projected at 3.9 per cent of gross domestic product in the current financial year, compared with the 4 per cent forecast in February.

The debt-to-GDP ratio stabilised at 78.4 per cent in the 2025/26 financial year, the first such stabilisation in nearly two decades, according to the minister. Gross tax revenue for 2026/27 has also been revised upwards by R17.1 billion from the February estimate, reflecting stronger collections from corporate tax, dividends tax and value-added tax.

The government plans to maintain fiscal discipline while pursuing structural reforms, strengthening state capacity and investing in infrastructure intended to support economic growth.

However, the revised forecast underlines the continuing challenge of translating improved public finances into faster economic expansion. The Treasury said growth remains too low and that sustained reform and infrastructure delivery will be needed to create a stronger basis for investment and employment.