Mbabane- Fuel prices in Eswatini could surge to as high as E30 per litre in the coming months, as escalating geopolitical tensions around the Strait of Hormuz disrupt global oil supply chains.
This warning comes from Business Eswatini Chief Executive Officer E. Dlamini, who cautioned that the Kingdom is highly vulnerable to external shocks due to its limited fuel storage capacity and reliance on imports.
Dlamini said Eswatini consumes approximately one million litres of fuel per day but has storage capacity of only two million litres, equivalent to just two days’ supply. This, he noted, leaves the country exposed to supply disruptions, particularly amid tensions involving the United States, Iran and Israel.
“Even though we are not part of the conflict, we are already feeling the effects,” Dlamini said, citing recent incidents where fuel vessels destined for Eswatini were detained shortly after the outbreak of hostilities.
He warned that global fuel shortages could intensify if the situation persists, potentially reaching a point where fuel becomes scarce regardless of price.
Eswatini relies heavily on fuel imports via South Africa, which initially cushioned supply shocks through stockpiling. However, Dlamini cautioned that these reserves are finite and may soon run dry.
The situation is further complicated by the region’s dependence on fuel traders, intermediaries who aggregate demand across countries such as Eswatini and Lesotho to secure bulk purchases from international suppliers.
Dlamini revealed that these traders are now charging as much as E6.50 per litre in additional fees, far exceeding the regulated margin of around 40 cents. This has rendered fuel imports financially unviable for many local suppliers, leading to reduced orders despite availability on the global market.
Additional strain is being placed on the sector by tax policies enforced by the South African Revenue Service (SARS). Importers are required to pay value-added tax of approximately E6.80 per litre upfront when procuring fuel from South Africa, with refunds only issued once the fuel crosses into Eswatini.
However, Dlamini noted that delays in VAT refunds have resulted in significant cash flow challenges, with one local supplier reportedly owed over E250 million.
The matter has since been escalated to the Southern African Customs Union (SACU), as stakeholders push for urgent resolution.
Inflation and Economic Fallout
The anticipated spike in fuel prices is expected to have widespread economic consequences. Dlamini warned that rising fuel costs would drive up the price of goods and services, triggering inflationary pressures across the economy.
“Everything is transported by fuel. Once fuel prices rise, the cost of commodities follows,” he said.
Eswatini recently recorded a historically low inflation rate of 1.9%, but this is likely to reverse as fuel-driven cost pressures build. Higher inflation could, in turn, prompt monetary tightening measures such as interest rate hikes, increasing the cost of borrowing and slowing economic growth.
Dlamini emphasised the urgent need for investment in a national strategic fuel reserve to buffer the country against global supply shocks.
“The current situation has exposed just how critical it is to have adequate reserves,” he said, adding that government and industry are now engaging more closely to prevent a potential fuel crisis.
Discussion about this post