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Government’s recent fuel levy respite gives confidence

Retail Capital managing director Miguel Da Silva says while the levy is a very small, temporary respite, it inspires confidence in small business owners that the government is looking at the impact of these escalating costs and doing what it can to alleviate the pressure.

Retail Capital managing director Miguel Da Silva says while the levy is a very small, temporary respite, it inspires confidence in small business owners that the government is looking at the impact of these escalating costs and doing what it can to alleviate the pressure.

Published Apr 12, 2022

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THE announcement by Finance Minister Enoch Godongwana that the general fuel levy will be reduced temporarily by R1.50 per litre on both petrol and diesel from April 6 until May 31 has been welcomed by South Africans.

However, this may not be enough to minimise the impact on local businesses and consumers, says Zane van Rooyen, the product marketing manager at field sales management CRM and mobile ordering app, Skynamo.

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Retail Capital managing director Miguel Da Silva echoes these sentiments, adding however that while the levy is a small, temporary respite, it has inspired confidence in small business owners that the government is looking at the impact of these escalating costs and doing what it can to alleviate the pressure.

"I think the important thing to note is that if you just continue to increase costs and there is no intervention, then business confidence will of course drop, and the economy will suffer," Da Silva said.

Since war broke out in Ukraine, fuel prices have sky-rocketed, reaching record highs and putting pressure on consumers' pockets.

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Van Rooyen says the increase in fuel prices has been affecting small and medium enterprises (SMEs) negatively, as they try to stay afloat in the wake of the Covid-19 pandemic.

“When it comes to small businesses that operate in the manufacturing, wholesale, or distribution sector, all supply chain goods need to be transported from source to destination. The increases can have major repercussions for these companies’ overheads and ultimately bottom lines," he said.

Most of the world is in the fragile position of still relying heavily on fossil fuels. As Ukraine is a global supplier of wheat, these two highly necessary and vital commodities are at risk of severe shortages, which will shoot prices to record highs, impacting world economies, and in turn, consumers, Van Rooyen said.

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Da Silva said while for South Africa it was still early days to know which way the dominoes would start falling, it was globally understood, that if Russia was cut out of the global economy and Ukraine was unable to meet its macro and micro-manufacturing and distribution volumes, this undoubtedly meant higher prices, a slower recovery, and a whole new global power structure.

With this in mind, Van Rooyen pointed out that local consumers might need to once again - or continue to - shop sensibly through this time, which would have a knock-on effect on many other small businesses in the country.

“When it comes to the food and beverage industry, produce for the sustainability of life simply has to continue, so they will have to adjust their prices accordingly to fulfil the need. As such, the demand for non-essentials will most definitely be placed under strain as the cost of fuel begins to bite and household budgets downsize as a consequence,” said Van Rooyen.

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“We are in unknown territory once again and the future is unpredictable. It is vital that the government does everything possible to protect our local small businesses as these are the growth engines of our economy.”

He said with the South African government wisely announcing the buffer period of adding fuel reserves to curtail the local fuel price, for now, this was “effectively allowing a hiatus in what we know would have to see our fuel price already exceeding R24 a litre and climbing, we have a grace period. However, there is no telling for how long and what tomorrow holds as the global fuel frenzy grows.”

Da Silva said the impact of the fuel price hikes needed to be looked at in a broader view.

"The electricity price and the interest rate are going up simultaneously. This means all industries will be impacted by these cost increases, which means input costs go up, and the cost to produce and deliver goods goes up," he said.

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