South Africa will reduce its fuel levy for one month to stop fuel prices rising even further in April, it said on Tuesday, after trade unions and business groups pressured the government to intervene to cushion the impact of the Iran war.

The finance and petroleum ministries said in a statement that the government would recoup via other mechanisms the R6-billion of tax revenue that it would forgo via the short-term levy cut.

Work is under way on a broader package of measures to support households and key sectors of the economy, the statement said, as despite the levy cut the regulated petrol price will rise by about 15% in April and wholesale diesel by 40%.

The general fuel levy will be lowered by R3 for April, taking the levy to R1.10 per litre for petrol and 0.93c per litre for diesel.

Finance Minister Enoch Godongwana told reporters the government would monitor developments in the Middle East and that if the conflict persists, it may provide some fuel levy relief in May and June.

"I don't think it can be sustained beyond June," he said.

LEVY CUT MIRRORS 2022 MOVE DURING UKRAINE CRISIS

South Africa implemented similar relief in 2022 following the start of Russia's war in Ukraine.

That reduction of R1.5 per litre remained in place for several months before being lowered and then withdrawn.

South Africa's central bank warned of inflationary risks from rising fuel prices at its monetary policy meeting last week, saying fuel inflation of more than 18% was expected in the second quarter.

The risk-sensitive rand has fallen nearly 7% against the dollar since the US and Israel launched strikes on Iran in late February, adding to inflationary risks.

EXPOSED TO GLOBAL ENERGY SHOCK

South Africa imports most of its petroleum products, leaving it highly exposed to swings in global energy prices.

Africa's biggest economy adjusts fuel prices monthly using a formula that factors in movements in global crude oil prices, the exchange rate and local taxes such as the fuel levy.

Price changes take effect on the first Wednesday of every month.