The significant increase in fuel prices in April and May is no longer a short-term pricing shock that businesses can ride out, says Business Unity South Africa (Busa) CEO Khulekani Mathe, adding that sustained increases in a core input such as fuel translate directly into higher operating costs, weaker balance sheets and difficult decisions about employment, service levels and investment for businesses.

In a media release, the organisation says the latest fuel price increase, driven by global oil market volatility, compounds an already difficult operating environment for firms, noting that industry data indicates that diesel can account for between 35% and 55% of total operating costs for road freight operators.

With about 80% of goods in South Africa transported by road, elevated fuel costs raise distribution and logistics expenses across the economy.

Busa says this erodes margins at every stage of the value chain, from agriculture and manufacturing to retail, ultimately reducing competitiveness and constraining growth.

The organisation warns that a highly fuel-intensive sector, such as the fishing industry, faces an immediate impact that threatens operational sustainability and employment, noting that data from this industry indicates that options are few, adding that none are 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,” says Busa.

The organisation adds that options such as absorbing losses, postponing investment, downsizing operations or exiting the market altogether have “crippling effects” on businesses and the broader economy.

It adds that 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. If these conditions persist, the risk is not just higher consumer prices, but permanent damage to productive capacity and jobs,” says Mathe.

Busa says it welcomes the temporary R3.93-a-litre fuel levy reduction for diesel as a short-term measure to provide limited relief to businesses and consumers noting, however, that more support is needed to avert the devastating economic consequences of the fuel price increases.

Hence, it argues that 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.

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

"South African businesses are resilient, 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,” says Mathe.