While September saw massive fuel price hikes in South Africa, early data from the Central Energy Fund showed further financial strain ahead for motorists.
The data pointed to further increases in the price of fuel for the month of October, with petrol possibly going up by 80 cents or more and diesel could go up by R1.50 or more.
Frank Blackmore, Lead Economist at KPMG, said as far as fuel prices are concerned, following the increases last month, the current values, the CEF shows an overall under recovery.
“We see that again because of the deterioration in both the rand exchange rate as well as an increase in the international product prices of fuel. This obviously would not be a good thing, especially on the diesel side of the equation, because diesel is used to move most of the goods around the economy.”
He further said that an increase in prices would be passed on to the consumer in the form of higher prices for goods and services.
“If I look at the impact on the economy, the waiting of the fuel prices in the PPI is just under 5%, and in CPI, just over 4%. Therefore, it’s a significant impact into the economy in any increases in the prices of fuel that we see. This would also mean that inflation would not decrease as fast as the previous read on inflation and because the increase in these prices would keep other prices in the economy high, which would, in itself, mean that interest rates decrease at a slower rate over time. So we would be stuck with higher rates for longer, and that means a suppression in both consumer spending, given those higher interest rates as well as the lack of investment spending by businesses, and that could also mean a lower growth rate or as long as it remain elevated,” Blackmore said.
Brina Biggs, Senior Manager at 1Life Insurance, said it is time for South Africans to tighten their belts once again.
“It seems the world has gone topsy turvy with war, high CPI and food inflation, weaker rand, higher oil prices, and, well, less electricity annually. All these factors and more have made consumers poorer than they were all those years back, as the rand does not stretch as far as it did,” she said.
“Add high, consecutive fuel increases for September and what looks like October - and the storm continues. The last month has also brought some reprieve with interest rate holding, but fuel prices would have eroded that reprieve as we brace the knock-on effect of this on food prices, again,” Biggs said.
“Economists do not foresee this ‘give and take’ economy changing until sometime early in 2024. So yes, South Africans, you need to be even more mindful on how you’re spending - ensuring that you budget like your life depends on it, for the last push because if 2023 has taught us one thing, it is to be financially prepared at all times,” she added.
Hayley Parry, Money Coach and Facilitator at 1Life’s Truth About Money, said that straight off the back of September's steep petrol price increases, it is not looking good for consumers in October.
“Strong international oil prices and a weak rand, it looks like consumers may be in for another 80c petrol price increase, and R1,50 on diesel, per litre. This is not good for consumers who are already very cash strapped. This may be a good time to start looking at cutting back on your travel, looking at ride sharing, or perhaps if there's any more room left on your belt, to keep tightening those belts,” she said.
Andra Nel, Purpose Manager at KFC SA, says that many South Africans will see this fuel increase as a incredible knock further to those really struggling household budget.
“We know that so many South Africans are telling stories of dire need, and so many children are faced with food insecurity, and they don't know where their next meal is going to come from. An increase in fuel hike will also lead to increase in food prices and the basic necessities that families need to survive,” she told Business Report.