Petrol hike, e-tolls bring hardship

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IOL PN PETROL 15 INLSA Prices are showing a potential climb of between 28 and 32c a litre for petrol, 15c a litre for diesel and 9c a litre for illuminating paraffin. Photo: Leon Nicholas

Johannesburg - Economists have warned that the introduction of e-tolling and the unpredictable price of petrol were likely to hit consumers hard in their pockets this year.

Gina Schoeman, an economist for Citibank, said that on the whole, petrol prices made up about 5 percent of consumer spending. However, this differed greatly across income groups.

“At the top-end income groups, consumers typically own cars and drive long distances, leaving them spending more than the average on petrol,” Schoeman said.

“At the low-end income groups, vehicle ownership is small, forcing individuals to make use of public transport where prices are typically more sticky. The petrol price is always a trade-off between the oil price and the rand exchange rate.

“As long as the rand continues to weaken (as it has done this month) and the oil price remains relatively stable, consumers will have to take on higher petrol prices which will push up public transport prices,” she said.

“There are also second-round effects from higher transport costs (petrol and e-tolls) as companies prefer to pass higher costs on to the end retail price of goods and services rather than squeeze margins.”

The price of all grades of petrol went up for the second time in as many months on New Year’s Day, and the AA warned last week of another possible hefty increase next month.

“Data from the Central Energy Fund is predicting big jumps in the fuel price for February,” said AA spokesman Graeme Scala.

Prices were showing a potential climb of between 28 and 32c a litre for petrol, 15c a litre for diesel and 9c a litre for illuminating paraffin.

Scala said this was because the rand-dollar exchange rate had deteriorated after remaining fairly flat last month.

“The rand is now testing R11 to the US dollar mark, and although international petroleum prices have declined over the same period, the drop has not been enough to offset the increased exchange rate,” Scala said.

If the spike in the exchange rate flattened, the figures could improve, but for now it was not looking good, he said.

E-tolling was launched on December 3 last year, and the new academic year started last week, both of which were likely to leave big holes in consumers’ pockets.

Dr Azar Jammine, chief economist at Econometrix, said: “Let’s hope there will be no major industrial actions of the past year this year, as these could negatively affect investor confidence.”

Jammine said the overall financial picture did not look too bad for the year, but slammed e-tolling as a “stupid” way of raising money.

He said the user-pay system on the province’s highways might not have too much of an impact on household spending as its drain on total private consumption expenditure would be about 0.1 percent.

“This is not a huge amount of money, but it doesn’t take away the fact that e-tolling was a stupid way of raising money to begin with,” he said. “This year the government would hopefully invest more in infrastructural developments and there will hopefully be a switch from consumption to production.

“In the past, there has always been criticism that the South African economy was driven by consumption.”

Jammine advised consumers to work harder and get a better education so they could earn more.

But Vusi Mona, spokesman for the SA National Roads Agency Limited, denied e-tolling would have a huge impact on finances.

Mona referred to a UCT Graduate School of Business study in 2010 which showed that the cost of dry goods, fruit and vegetables moving from Isando to Soweto, would go up between 0.23 percent and 0.77 percent, depending on the value of the cargo. This means the impact is less than 1 percent.

“Dry goods taken from Pretoria to a depot in Joburg and delivered to Soweto will have a cost increase of 0.12 percent, again depending on the value of the cargo.”

Mona said this amount was insignificant when compared to the economic benefits of tolling.

The AA, a fierce critic of e-tolling, has called for a return to a dedicated road fund or a ring-fenced fuel levy.

The National Credit Regulator’s acting education and communication manager Mpho Ramapala said consumers had to be more financially responsible than ever before. The best way to begin the new year was on a solid financial footing.

“For many people who were unable to save for schooling and other things last year, the only solution is to take out credit to fund these unusual expenses.

“We implore all South Africans who find themselves in that situation to borrow responsibly, and to avoid resorting to unregistered credit providers,” Ramapala said.

Potential climb of between 28 and 32c/l for petrol in February

Petrol: Between 28-32c/l

Diesel: 15c/l

Paraffin: 9c/l

The Star



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