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The announcement of fuel price increases of between R3.27 and R5.27 per litre, by the Department of Minerals and Petroleum Resources, will drive up fuel-related input costs for businesses. This will turn profitable businesses into loss-making enterprises. 

"This is no longer a short-term pricing shock that businesses can ride out," said Khulekani Mathe, BUSA CEO. "Sustained increases in a core input like fuel translate directly into higher operating costs, weaker balance sheets, and difficult decisions about employment, service levels, and investment."

The latest fuel price increase, driven by global oil market volatility, compounds an already difficult operating environment for firms.

Industry data indicates that diesel can account for between 35% and 55% of total operating costs for road freight operators. With approximately 80% of goods in South Africa transported by road, elevated fuel costs raise distribution and logistics expenses across the economy. This erodes margins at every stage of the value chain, from agriculture and manufacturing to retail, ultimately reducing competitiveness and constraining growth. 

A highly fuel-intensive sector, such as the fishing industry, faces an immediate impact that threatens operational sustainability and employment. Data from this industry indicates that options are few, and none is without cost. One option is to reduce fishing activity to prevent losses, which could put more than 5,200 jobs at risk. The second is to recover costs by increasing prices by between 25% and 30%. This is not feasible without undermining competitiveness in both domestic and international markets.

Options such as absorbing losses, postponing investment, downsizing operations, or exiting the market altogether have crippling effects on businesses and the broader economy. Small and medium-sized enterprises are particularly vulnerable, as they lack the financial buffers and pricing power of larger firms. 

"Companies are forced into impossible trade-offs between covering rising fuel costs and meeting payroll or supplier obligations," Mathe added. "If these conditions persist, the risk is not just higher consumer prices, but permanent damage to productive capacity and jobs."

BUSA welcomes the temporary R3.93 per litre fuel levy reduction for diesel as a short-term measure to provide limited relief to businesses and consumers. More support is needed to avert the devastating economic consequences of the fuel price increases.

Accelerating effective rail reform and restoring freight rail capacity would materially lower logistics costs over time, reduce reliance on road transport, and improve resilience against fuel cost volatility.

Many businesses are investing in efficiency measures such as route optimisation, fleet modernisation, and alternative energy solutions to reduce diesel dependency. While these actions demonstrate resilience and adaptability, they often require upfront capital that is out of reach for smaller enterprises.

"South African businesses are resilient," Mathe concluded, "but resilience has limits. If high fuel costs become a sustained feature of the operating environment, the consequences will be lower investment, fewer jobs, and slower growth. Addressing input cost drivers must be a national priority if we are serious about economic recovery and inclusive growth."

Issued by Business Unity South Africa