From the pump to the supermarket shelf: South Africa braces for rising costs amid Middle East volatility

WCape stakeholders see a significant cost-push, even if conflict peters out soon

As the global spotlight intensifies on the Middle East, South Africa’s trade and logistics sectors are being forced to navigate a "perfect storm" of rising operational costs and supply chain volatility. And a primary thread linking these disruptions is a significant cost-push effect that is likely to filter down from the pump to the supermarket shelf, according to the latest data and expert commentary.

Shipping faces a pronounced cost-push due to multi-fold increases, according to the latest Cargo Movement Update published this week by the Southern African Association of Freight Forwarders (SAAFF). 

The impact is characterised by:

-- Surging Bunker Prices: Fuel costs for vessels are rising in tandem with global oil volatility.

-- Risk Premiums: Elevated war-risk premiums and conflict surcharges are now filtering through to the landed costs of both imports and exports.

-- Capacity Constraints: Longer voyage distances and schedule volatility are reducing effective global shipping capacity, increasing inventory risk for local traders.

Unfortunately, the increased vessel traffic around the Cape of Good Hope is unlikely to reap economic benefits due to the current limited supply of value-added services, the report says. 

“In essence, South Africa will experience the same inflationary logistics shock as the rest of the world, without necessarily capturing proportional upside from the traffic diversion. Despite being far from the geographical action, South Africa’s trade, transport, and logistics industry is nonetheless in the middle of the consequences, like much of the world, not directly involved in the conflict,” the SAAFF report says.

However, there has yet to be a significant impact on the Port of Cape Town, according to Glen Steyn from the Western Cape Department of Economic Development and Tourism. 

“Some secondary impacts, like lower availability of vessels because their journeys take longer. Some shipping lines are raising surcharges, which will increase the cost of logistics. Fuel stocks are impacted, but that is not a direct port impact,”  Steyn told Cape Chamber this week.

The Road Freight Association (RFA) reports that the logistics sector is already on the back foot following a fuel price hike in March. Diesel—which powers the vast majority of South Africa's land-based freight—increased by between 62 and 65 cents per litre (3.25%).

"Fuel can be anywhere between 35% and 55% of operating costs," notes the RFA. "With over 80% of South Africa's freight moving by road, these fluctuations have an exponential impact. As transport companies face severe cash flow constraints, they are forced to choose between absorbing the costs or adjusting rates, the latter of which directly impacts the pricing of consumer goods."

Economist Dawie Roodt offers a cautiously optimistic view on the duration of the crisis, suggesting that geopolitical pressures may lead to a relatively quick truce. However, he warns that the "shock is already in the system."

Roodt points to two critical domestic vulnerabilities that exacerbate the current situation:

-- Reduced Refinery Capacity: South Africa is increasingly reliant on imported refined products, such as diesel, which is currently in short supply globally.

-- Strategic Reserves: Concerns remain over the state of South Africa's strategic fuel reserves following the controversial sale of stocks years ago. "What we have in terms of strategic reserves, I do not know," Roodt noted, suggesting now is the time to renew the dialogue on national energy security.

Maarten van Doesburgh, Economics Head at the Cape Peninsula University of Technology, says South Africa’s biggest risks emanating from the Middle East crisis may be geopolitical, not economic.  

“South Africa has maintained historically cordial relations with Iran. While diplomatic engagement with all nations is part of international relations, the global geopolitical environment is becoming increasingly polarised,” Van Doesburgh says. 

“If tensions between Iran and Western powers intensify, South Africa’s diplomatic alignment could come under closer scrutiny from key trading partners in Europe and North America. That matters because South Africa’s economy remains deeply integrated with Western markets and financial systems. Access to export markets, foreign investment and global capital flows remain critical to the country’s economic stability.”

“In simple terms, South Africa’s economic relationship with Iran is relatively small, while trade with Western economies runs into hundreds of billions of rand. This raises a difficult but necessary question: In a world increasingly shaped by geopolitical blocs, is South Africa positioning itself on the wrong side of the Iran conflict?

“The answer could carry consequences far beyond commodity prices,” Van Doesburgh said.