Fuel prices go up as government adjusts dealer margins

Image contributed  (Xinhua/Chen Cheng)

Motorists will face higher fuel costs from Wednesday, as the Ministry of Mines and Energy has announced a 50-cent per litre price increase. At the same time, fuel retailers will see their margins rise by 30 cents per litre, while the Road Fund Administration levy will increase by 20 cents per litre.

The ministry says the adjustments are due to the introduction of a new minimum wage for fuel station workers and the need to fund road maintenance. However, the decision has sparked debate over whether the government is subsidising wages in the sector.

Tannan Groenewald

Head of Data & Analytics at Cirrus Capital, Tannan Groenewald argues that the public is ultimately bearing the cost of the wage increase, rather than the government directly subsidising employers. He points out that the fuel retail sector already operates on thin margins, and without the margin increase, many businesses could struggle to remain profitable.

“If the dealer margin wasn’t adjusted, we would likely see closures and job losses, further straining an already fragile labour market.”

With the labour market already facing significant challenges, experts warn that wage increases must be carefully balanced against economic sustainability.

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Meanwhile, in neighbouring South Africa, fuel prices have been rising for the past four months but will see a modest decline in March 2025. Petrol prices will drop by 7 cents per litre, while diesel will fall by 24 cents per litre. The decrease is attributed to the rand strengthening against the US dollar, with the exchange rate improving from R18.7343 per dollar to R18.5047 per dollar over the past month. South Africa’s fuel prices are now lower than Namibia’s, due in part to differences in taxation and fuel levies, as well as domestic market policies.