We should stop pretending this is simply another oil-price spike.
Brent crude has surged above $100 (R1 600) a barrel, briefly touching around $108. At the time of writing, it is trading at around $105.
The human cost of the conflict is devastating. This is not an opinion on the war but an analysis of its economic consequences – consequences that are increasingly impossible for South Africa to ignore. The short- and medium-term economic outlook is deeply worrying.
The problem is not simply the price of oil. It is the growing realisation that disruption to the world’s critical shipping routes might not be over anytime soon. Traffic through the Strait of Hormuz has collapsed, while the threat around the Bab el-Mandeb remains serious. The world’s energy and shipping arteries are being disrupted at a time when the global economy can least afford another inflationary shock.
And there is an uncomfortable reality. The US can launch air strikes and destroy targets, but it cannot easily make the shipping threat disappear. Iran and its allies have demonstrated that relatively inexpensive drones, missiles and other asymmetric capabilities can threaten expensive shipping infrastructure.
The conflict might, therefore, continue disrupting global trade even when the military balance is overwhelmingly in favour of the US and its allies.
The economic consequence is obvious: inflation. Higher oil prices feed into transport, electricity, manufacturing, agriculture and logistics – and ultimately into the price of almost everything consumers buy.
For South Africa, the impact could be considerably worse.
First, we import crude oil and refined petroleum products at international prices. When Brent rises, our fuel costs rise.
Second, if the oil shock fuels global inflation and investors become more risk-averse, emerging-market currencies such as the rand can come under pressure.
Then comes the double effect. We pay for imported oil in US dollars. If the rand weakens at the same time the dollar price of oil is rising, the rand cost of every barrel increases faster.
Third, higher fuel prices push inflation higher but higher interest rates cannot produce more oil. They cannot reopen shipping lanes or repair disrupted supply chains. Yet the Reserve Bank must prevent an external shock from becoming embedded in domestic inflation expectations. Government also has limited fiscal room to cushion households and businesses from increasing fuel prices.
This is where we need to acknowledge something important. South Africa is not standing still. Public-private collaboration that has helped stabilise electricity supply is producing results. Loadshedding has effectively ended. Rail volumes are recovering and port efficiency has improved. Transnet has reported its first annual profit in four years, while private-sector participation in rail and ports is expanding.
These are positive developments. They demonstrate something I have argued repeatedly in previous columns: when government and business work together, South Africa can make meaningful economic progress.
But the timing could not be more important.
We cannot control the Middle East, the oil price or the dollar. What we can control is the resilience of our own economy. That requires one thing above all else: economic growth.
Growth means investment. Investment means production. Production means businesses. And businesses create jobs. That matters enormously now.
With unemployment at 33.6%, millions of South Africans have little protection against another sustained increase in fuel, food and transport costs.
My message to government is simple: stay focused on growth.
Accelerate the reforms that are working. Bring more private capital into infrastructure. Continue opening rail and ports to private participation. Fix what remains broken in electricity, transport and municipalities. Remove the barriers that prevent businesses from investing, expanding and employing.
We have seen what collaboration can achieve. Now we need more of it – urgently.
• Van Doesburgh is head of economics at CPUT and a regular commentator on South Africa’s economic landscape, focusing on financial markets, policy, and business strategy. vandoesburghm@cput.ac.za
- Brent crude oil prices have surged above $100 per barrel, briefly reaching around $108, and are trading near $105 at the time of writing.
- Disruptions to key global shipping routes like the Strait of Hormuz and Bab el-Mandeb are causing ongoing inflationary pressures on transport, electricity, manufacturing, agriculture, and logistics.
- South Africa is especially vulnerable to higher oil prices due to its importation of crude and refined petroleum at international prices and potential weakening of the rand against the dollar.
- The Reserve Bank faces challenges in managing inflation as higher interest rates cannot restore oil supply or shipping routes, and government fiscal capacity to mitigate rising fuel costs is limited.
- Improvements in South Africa’s electricity supply, rail volumes, and port efficiency show positive effects of public-private collaboration, but urgent economic growth, investment, and further reforms are critical to address inflation and unemployment.
We should stop pretending this is simply another oil-price spike.
Brent crude has surged above $100 (R1 600) a barrel, briefly touching around $108. At the time of writing, it is trading at around $105.
For
First, we import crude oil and refined petroleum products at international prices. When Brent rises, our fuel costs rise.
But the timing could not be more important.
We cannot control the
My message to government is simple: stay focused on growth.
Accelerate the reforms that are working.
We have seen what collaboration can achieve. Now we need more of it – urgently.
• Van Doesburgh is head of economics at CPUT and a regular commentator on
