File image: IOL
File image: IOL

Stronger rand and lower oil prices is good news for consumers

By Chris Harmse Time of article published Nov 19, 2018

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JOHANNESBURG – The much lower international oil price and stronger rand may just ignite consumer confidence and spending over the Christmas period.

On Thursday last week, the price for 95 octane petrol was over-recovered by 156 cents a litre for the month beginning on November 2. Over- recovery on the prices for 93 octane petrol (153 cents) and diesel (96 cents) also indicates a possible very large cut in fuel prices in early December.

The sharp decrease in the oil price to levels lower than $70 a barrel and the stronger R/$ exchange rate had led to the high under-recovery.

The strong appreciation of the rand to levels close to R14 to the greenback on Friday will contribute even more to a further under-recovery over the next two weeks.

It remains to be seen whether the Central Energy Fund will give the full deduction through to the consumer or keep an amount back to boost the so-called slate levy. The slate levy can be seen as a fund to stabilise fuel prices.

A decrease in the petrol price by 150 cents means a 9 percent lower price for 95 petrol in Gauteng, which could contribute to a 0.4percent decrease in the inflation rate for December.

The dollar traded at R14.02/$ on Friday afternoon or 28 cents a litre stronger than the R14.30/$ a week ago.

Against the pound, the rand traded stronger by 60 cents on R18.04 and on R16.00/euro, or 64 cents stronger than the previous week.

On the JSE, share indices had another uncertain and weaker week.

Domestic and global geopolitical factors such as the US/China trade war, the Brexit uncertainty, US interest rates and the land expropriation issue domestically contributed towards losses on almost all indices.

The all share index traded 1 199 points or -2.2percent lower than the previous week. The resources index lost 2percent, while industrials was down by 2.4percent.

The rating agency Fitch announced on Friday that it has kept its ratings of South Africa's major banks at BB- with a stable outlook - one notch below investment grading.

This week investors and consumers will await the announcement of the Reserve Bank's monetary policy committee on interest rates after their last meeting for the year.

South Africa's inflation rate for October will be announced by Stats SA on Wednesday.

Chris Harmse is the chief economist at Rebalance Fund Managers.

The views expressed here do not represent those of Independent Media.


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