Petrol price hike 'foreshadows more economic shocks'
Cape Town - South Africa's already cash-strapped consumers will have to dig deeper into their pockets as petrol, diesel and illuminating paraffin are set to increase in price and experts have warned that the hikes foreshadow further shocks to the economy in the months to come.
On Monday, Mineral Resources and Energy Minister Gwede Mantashe announced the adjustment of fuel prices effective today, January 6.
South Africa’s fuel prices are adjusted on a monthly basis, informed by international factors such as the fact that South Africa imports both crude oil and finished products at a price set internationally. This includes importation and shipping costs.
Mantashe said: “The price of 93 octane petrol sold inland will rise 43c a litre and that of 95 petrol will increase by 40c. Diesel prices will rise by between 54c and 55c depending on the sulphur content. A litre of 93 petrol will retail for R14.69 and 95 petrol will sell for R14.86.”
According to a statement from the AA: "While South African fuel prices are well off their record highs, the country's economy is in a fragile state, and any shocks to international oil prices or the rand/US dollar exchange rate could hurt fuel users badly."
President of the Cape Chamber of Commerce and Industry, Janine Myburgh, said: “There is no doubt that the economy has taken a severe hit from the effects of both Covid-19 and the measures taken to slow its spread.
“This is bound to reflect on the value of the rand which will likely weaken further in the months ahead. This will drive up the price of all imported goods and raw materials. This is likely to have a ripple effect upwards on all consumer goods.”
Speculating on where some of the shocks can be expected to come from, Myburgh said: “Given the negative impact on state revenue generally in the past year, there is a strong likelihood of a rise in taxation at all levels which will hit wage earners.
“This could spill over to labour unrest and demands for more money that if granted, will add to pressures on prices. At a micro level, the tempo with which small businesses may close can be expected to increase with the attendant loss of jobs.”
Chief executive of debt counselling service Debt Rescue, Neil Roets, said: “This has a nasty knock-on effect as the cost of goods shoots up thanks to more expensive transport. The poor are the worst hit when the price at the pumps goes up and there is a possibility that consumers, already affected by Covid-19, will be reduced to buying food on credit.
“With fewer jobs around and more mouths to feed, these increases in rands and cents will add more woes to those who have less,” said Roets.
Economist Dawie Roodt said: “It’s bad news. It’s always bad news if the petrol price goes up, but I don’t think it’s going to have that much of an impact on inflation, for example.
“Many people are simply staying at home and not using that much fuel. Also, very importantly, is that demand in the economy is very weak so people are buying even less and it’s much more difficult to pass on price increases,” said Roodt.
“But of course it doesn’t mean it doesn’t matter. The price increase will impact on the poorer section of the population,” he said.