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Consumers in the country face double whammy of massive fuel hike and higher food prices

Labour unions and debt firms are warning South African consumers to be very frugal with their spending as they face a ’double whammy’ of a massive fuel hike increase, which would result in higher food prices, and as the fallout of Russia’s invasion of Ukraine increases both costs. Picture: Karen Sandison/African News Agency(ANA)

Labour unions and debt firms are warning South African consumers to be very frugal with their spending as they face a ’double whammy’ of a massive fuel hike increase, which would result in higher food prices, and as the fallout of Russia’s invasion of Ukraine increases both costs. Picture: Karen Sandison/African News Agency(ANA)

Published Mar 3, 2022

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LABOUR unions and debt firms are warning South African consumers to be very frugal with their spending as they face a “double whammy” of a massive fuel hike increase, which would result in higher food prices, and as the fallout of Russia’s invasion of Ukraine increases both costs.

The Department of Mineral Resources and Energy this week announced that the price of 95 Octane Petrol would rise to R21.60 per litre, and 93 Octane Petrol to R21.35. An increase of R1.46 per litre, it is much higher than predicted and pushes the price to a record high.

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South Africa’s economy has hit a “double whammy” with the rapid fuel price increase, according to economist Dr Roelf Botha.

“Everything in the value chain will become more expensive in the next few weeks. The reality is that families will struggle with less money in their budgets to spend,” said Botha.

Dr Ferdi Meyer, a director of the Bureau for Food and Agricultural Policy, said the rise in the price of diesel impacted on every aspect of the input cost of the farmer – from the machinery used to plant, the price of fertiliser, which doubled over the past year, to transportation.

“Road transport is used for the most goods, making it even more expensive. The impact would have been less severe if South Africa had a proper functional railway service making transport much cheaper,” said Meyer.

Meyer said more than a third of South African households spent between 40 percent and 50 percent of their monthly income on food.

“There is no room for cutting corners. Families will have to manage their budgets very effectively to muster the storm,” said Meyer.

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According to the Automobile Association (AA) the fuel hikes will have a sharp and immediate effect on the poor, and a long-term impact on inflation.

The AA said the outlook for April remained unclear, but Russia’s military action in Ukraine could push international oil prices even higher which will again impact locally. This was reiterated in the mid-month petrol price data from the Central Energy Fund that shows that petrol could jump to an unprecedented R25 per litre in the near term.

Debt Rescue's chief executive, Neil Roets, said the fuel price hike was shattering news for consumers, and for many it would lead to financial ruin.

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“More increases in the fuel price inevitably impact on every South African, given the reliance the country has on fuels for transportation, manufacturing and in the agricultural sector. Consumers have already been pummelled with a volley of month-on-month increases in the cost of fuel over the past year, and now they face the steepest one yet. How are they expected to cope with this?”

Roets said following Finance Minister Enoch Godongwana’s maiden budget speech, all eyes were on the government to find a way to lower the petrol price.

However, the concern was that while Godongwana and Mineral Resources and Energy Minister Gwede Mantashe had agreed that a review of all aspects of the fuel price was needed, the proposed budget did not elaborate further on an actual plan of action.

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Godongwana noted that a combination of regulatory amendments can reduce the petrol price by 103.82 cents/litre, increasing gross domestic product (GDP) by 0.67 percentage points, by 2028. The only silver lining was that any potential increases would not be combined with increases to fuel taxes and the General Fuel and Road Accident Fund levies would not increase this year.

Roets said this was all good and well, but urgent action needed to be taken right now to avoid the financial collapse of households across the country.

“Consumers have come to the end of the road and the burning question is ‘where do they go from here?”

Meanwhile, Uasa spokesperson Abigail Moyo said with Russia’s military action in Ukraine posing a threat to fuel prices worldwide, the labour union was keeping a worried eye on further developments after local fuel price increases were announced over the weekend.

Uasa urged Godongwana to move forward his intended discussion on the calculation of fuel prices in South Africa with Mantashe.

“The ever-increasing fuel price – as a result of international affairs and locally enforced levies – affects the lives of workers on all levels. It causes a constant knock-on effect on the prices of consumer goods and transport while salary increases are barely worth mentioning. Where will it end?”

Moyo said that South African workers were falling behind with their finances with simply keeping up with expenses becoming a nightmare of many. She said while the world held its breath waiting to see how the war between Russia and Ukraine would impact the rest of the world, Uasa encouraged workers to stay positive and to limit their expenses as much as they could.

Likewise, the Motor Industry Staff Association, warned its nearly 53 000 members that the next few weeks would require everyone to dig deep into their pockets and save money where they could.

Trade union Solidarity is going one step further on its opposition to high fuel prices.

On Tuesday it announced that it had drafted a parliamentary petition and is running a huge campaign to pressure the government to deregulate the petrol price and to lower fuel prices.

According to Solidarity, the government has a stranglehold on fuel prices which must be broken. In its petition Solidarity demands that the determination of fuel prices be left entirely to the market so that healthy competition can prevail for the benefit of consumers.

Theuns du Buisson, an economics researcher at the Solidarity Research Institute, said: “While the rest of the world embraces the free market, the South African government is clinging to Soviet thinking that is hurting the economy. Determining fuel prices is one such example that is hurting the economy.

“It is absurd to treat every filling station in every region in the same way while their immediate market environment, as well as the process of getting the fuel to that point differs. Ultimately, this is to the detriment of the consumer,” he said.

Solidarity said it had no choice but to launch an extensive campaign and requested support for this campaign against the government.

“We ask everyone to sign our petition that will be submitted to Parliament. If enough people make their voice heard the government cannot ignore us. Workers and taxpayers should no longer underestimate their bargaining power. The enormous costs of a power-hungry government are now – perhaps more so than ever before – tangible and quite simply financially unsustainable,” Du Buisson said.

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