The South African government has urged Saudi Arabia, one of the world’s largest oil producers, to increase production in a bid to arrest soaring fuel prices.
President Cyril Ramaphosa is on a state visit to the country. On Thursday he met with Saudi King Salman bin Abdulaziz al Saud, and Crown Prince Mohammad bin Salman, who is next in line to the throne.
The meeting comes amidst growing anger in South Africa over increased petrol prices, which topped R16 per litre for the first time in inland areas this month. Energy minster Jeff Radebe confirmed that oil prices were part of the high level talks.
“It has a very important bearing on the price of oil. That is why we are looking to oil-producing countries to put more oil in the market so that the price of oil can go down, so that we can be able to mitigate against the negative impact of the hike of fuel prices in South Africa,” Radebe said.
South Africa's record petrol price has been caused by the combination of a weaker rand, higher global oil prices, and higher fuel taxes.
A year ago benchmark Brent Crude was about $47/$ per barrel. On Thursday afternoon it was trading at $74.26/bbl.
The inland price for a litre of 95 octane unleaded petrol rose to a record R16.02 at the start of July. The coastal price is R15.43. Prices are expected to increase again in August.
Government is under pressure from struggling consumers to try and reduce the cost of petrol, which is expected to lead to an increase food prices. Political parties have called for government to increase petrol reserves and consider freezing or decreasing the fuel levy.
“We have heard a lot of outcry from South Africans, we want to see the oil price coming down,” Radebe said following the meeting.
South Africa imports 47% of its oil from Saudi Arabia.
Ramaphosa is on a three country visit to bolster economic relations with oil-producing countries. He visited Nigeria on Wednesday and, following his two-day visit to Saudi Arabia, he will travel to United Arab Emirates on Friday to meet with Sheikh Mohammed Bin Zayed Al Nahyan, the Crown Prince of Abu Dhabi.
Ramaphosa secured a pledge of $10bn (about R133bn) in investment from the Saudi Arabian government, which is expected to be invested into South Africa's energy and power generation sectors. The investment forms part of Ramaphosa’s ambitious $100bn investment drive over five years to kick start SA's struggling economy.
At least R12bn of the R133bn will go to renewable energy projects.
An ecstatic Radebe described the investment pledge as “fantastic”.
Pretoria has also secured Saudi Arabian support in its quest to become an observer of the Organization of Islamic Cooperation.
The influential group of 57 countries brings together Islamic countries globally and other major Islamic countries including Pakistan, Indonesia and Malaysia.
Deputy Director General for Asia, ambassador Anil Sooklal said Saudi Arabian support holds “tremendous weight" and will influence other members to support Pretoria’s entry to the OIC.
“Its an organisation that also focuses on development, so [...] observer status will give SA a number of privileges in terms of accessing developmental cooperation support," Sooklal said.
"So their voice and support, echoed today by his Majesty for observer status, will hold tremendous weight."* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER