Prohibitively high transport costs are worsening the cost-of-living crisis in South Africa and other economies, with low-income households spending up to 85 percent of labour income just to commute to work, the International Monetary Fund said in its latest assessment.
In the 2025 Article IV Consultation for South Africa, IMF staff said that addressing the country’s legacy of spatial inequality requires integrated reforms across housing policies, urban transport, and rural connectivity “needed to reduce prohibitively high transport costs (40–85 percent of labor income) and limited job accessibility, particularly for low-income households.”
The Fund warned that transport poverty is undermining labor-market participation and compounding inflation pressures on essential goods. “Expanding high-capacity urban public transit alongside formalizing informal transport can also help reduce commuting costs and improve access,” the report said. “To improve rural connectivity, efforts should focus on upgrading roads, regulating informal transport, and embedding transport planning in local development strategies.”
The IMF noted that additional reforms are needed to address spatial inequality and improve the flexibility of the labor market. “Complementary reforms addressing labor-market rigidities are essential to durably lower South Africa’s high unemployment rate and facilitate the entry and growth of SMEs,” it said.
Transport costs have emerged as a key driver of the broader cost-of-living squeeze across several countries. In Nigeria, witnesses at a continental tribunal on debt justice told the IMF and World Bank that “the removal of fuel subsidies in Nigeria, following IMF recommendations, had led to skyrocketing transport costs that disproportionately impacted those living in poverty.”
The IMF has also cautioned European governments against broad fuel subsidies to offset energy and transport price spikes, noting that voter pressure on politicians to step in was very high. “But voter pressure on politicians to step in and offset the high fuel prices was very high, Kammer said, because Europeans have come to expect state support whenever a crisis hits after the COVID pandemic in 2020 and the Russian energy shock in 2022.”
In South Africa, the Fund recommended demand-side rental subsidies and mortgage assistance, incentives to develop affordable housing in well-located urban areas, supported by zoning reforms, strategic land release, and streamlined permitting processes as part of measures to ease commuting burdens.
The IMF said reducing transport and energy costs through targeted public investment, rather than broad subsidies, is critical to tackling the high cost of living while preserving fiscal space.
