Minister of Finance Neal Rijkenberg has assured locals that the country is protected from the immediate impact of rising global oil prices, with the announced fuel cushion projected to last nine months to a year.
Speaking during the latest ‘Finance in Focus’ session, the minister said government has put measures in place to shield consumers and businesses from sudden fuel price increases.
Rijkenberg explained that the Strategic Oil Stabilisation Fund was established so as to absorb shocks from the international oil market.
This means that even if global fuel prices rise sharply, the local pump price does not increase immediately. The Fund helps maintain stability in the economy by protecting household spending and supporting industries that depend on fuel.
Developments in neighbouring South Africa have also raised concerns after they recently announced a sharp increase in fuel prices, with petrol rising by more than R3 per litre and diesel increasing by over R6 per litre.
These changes reflect rising global oil prices and currency pressures. With the country’s economy closely linked to South Africa, such increases often signal what could happen locally.
Rijkenberg said the Fund has been effective so far, but warned that it is not unlimited.
“The cushion we have built is robust, but it is not infinite. If the global market continues to move against us, the nine-month protection period will naturally contract as we draw down on the fund more aggressively to keep local prices manageable,” said the minister.
Rijkenberg noted that the original estimate of nine months was based on global oil prices staying within a moderate range.
However, prices have recently increased beyond expectations. Brent Crude has risen above 100 US Dollars per barrel due to ongoing tensions in the Middle East, including concerns around supply disruptions.
As a result, the difference between the cost of importing fuel and the price paid by consumers is increasing. This gap means government must use more money from the Fund to keep local prices stable.
The faster the fund is used, the shorter the cushion period becomes.
The minister said while the situation is challenging, government has prepared for different outcomes.
“Like I mentioned last time, fortunately we have a cushion, a stabilisation fund that has been set up. So as a government, we have planned for that,” he said.
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He added that the cushion would last up to a year under certain conditions, but if global prices continue to rise, it may be used up sooner. Despite this, government remains committed to protecting citizens from the full impact of rising fuel costs.
The minister also highlighted other risks linked to the global situation.
These included the supply of fuel, which could be affected by international conflicts and the rising cost of fertiliser. He said government is monitoring these issues closely to ensure the country remains stable.
At present, there are no major fuel shortages expected, but the risk remains if global supply chains are disrupted.
Rijkenberg said government is doing everything possible to ensure that the country continues to receive enough fuel.
Another concern is the sharp increase in fertilizer prices, especially urea, which has gone up by more than 50% globally.
This could affect farmers during the next planting season, especially those growing maize.
To address this, government has approached the African Development Bank (AfDB) for financial support.
The process is still ongoing, but the aim is to find ways to help farmers cope with rising costs.
“We are really hoping and working on that to make sure that it is managed as best as we can,” the minister said.
The ministry of natural resources and energy confirmed that government provided a cushion of E334 million in April in a bid to reduce the impact of rising prices.
However, as global costs continue to soar, more funds would be needed to maintain stable prices.
This means the stabilisation fund is being used more quickly than expected.
Despite this, Rijkenberg said government still had a plan in place and is carefully managing the situation.
He emphasised that the goal is to protect citizens from sudden economic shocks while preparing for a future where global prices may remain high.
For now, the fuel cushion remains in place, offering some relief as the country navigates uncertain global conditions.
