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Rising fuel costs could mean less people travelling home for the holidays

Operators in all sub-sectors of the bus and coach industry are reaching a point of no return and this will result in solutions being sought around the fare box. File picture: Yves Herman/Reuters

Operators in all sub-sectors of the bus and coach industry are reaching a point of no return and this will result in solutions being sought around the fare box. File picture: Yves Herman/Reuters

Published Jun 2, 2022

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Durban - Rising fuel prices have left the Southern African Bus Operators Association (Saboa) concerned that the current record levels of fuel prices and the latest increase announced for June 2022 will have a dire and negative impact on the industry and the extended value chain, as well as the commuting public at large.

Saboa represents a wide range of bus and coach operations in South Africa, including commuter bus operators, long-distance intercity and interstate services, school bus operators and tour/charter operators and cross-border operators.

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This week, the price of 93 unleaded petrol increased by R2.43 per litre, while 95 unleaded went up by R2.33. Diesel prices increased by a smaller margin, but it was still a substantial R1.07 increase in the case of 50ppm and R1.10 for 500ppm.

Saboa executive manager Bazil Govender said that fuel costs comprise 30% of total operating costs (TOC) within the bus industry. As of December 2021, the year-on-year impact was a TOC increase for diesel alone of 13.1%. By the end of May the impact for 2022 was already an increase in TOC of more than 5.5% and the June increase will push that further.

He said that according to Statistics SA, the Transport Cost Index increased by 14.7% (April year-on-year). The bus industry is experiencing this type of cost pressure.

“Whilst the industry is appreciative of the relief in the form of the extended reduction in the fuel levy announced by the Treasury, the forecast for the projected fuel price does not bode well for the total operating costs of companies,” Govender said.

He said that in most cases, and where practical, operators have engaged with all service providers to ensure that other methods of cost containment are implemented. However, these options are now saturated and at breaking point.

The resultant cash flow constraints and financial pressures brought about by the Covid-19 pandemic impacted profitability, with a direct correlation to a declining fleet age and increasing maintenance costs.

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In a declining market, due to a decrease in commuter numbers, the concern is around the future financial outlook and sustainability of the bus industry. This mass transport sector cannot be allowed to collapse after the demise of the Passenger Rail Agency of South Africa.

“In the main, operators in all sub-sectors of the bus and coach industry are reaching a point of no return and this will result in solutions being sought around the fare box,” Govender said.

He said that these options will inevitably mean a range and/or combination of adjustments that could result in commuting costs and fares being increased:

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  • by higher than CPI-related levels
  • more than once a year (deviating from the traditional annual fare increases)
  • as a series of adjustments for fuel-related costs recoveries.

“All in an effort to mitigate the blow of the high fuel increases and in an effort to ensure continuity of services. Any and all of these options will directly impact the commuting and travelling public,” Govender explained.

“It must be noted, however, that operators are not always able to pass the full impact of the massive fuel price increases on to the passengers. There are inherent contractual and operating conditions that require extensive engagements and consultations prior to implementing fare increases and in most cases, commuters would simply not be able to afford these increases. Past experience has shown that forced direct transfer of increases in costs has had negative reception and outcomes. This process could result in further passenger losses and protests or boycotts of public transport.”

Govender added that in the mainstream public transport bus operations funded by the Public Transport Operations Grant the average cost impacts of the fuel price increases range from R3 million to R5m increase in costs per month. The compounded effect over the three-month period from April to the end of June 2022 is likely to be in the region of R11m increase in costs for fuel. Another aggravating factor is the most incongruent timing of the decrease of the Public Transport Operating Grant for the 2022/2023 financial year, by 0.43%.

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“The industry approach is clear in that should the fuel price continue to increase as predicted and if no assistance is forthcoming from the government to assist operators, there will be no option but to implement further fare increases directly related to fuel price increases. These increases could be as high as 22% on the regular high service corridors. If the industry is unable to recover the cost increases from passengers and if no assistance from the government is forthcoming, operations that render services to the communities that are dependent on public transport may be affected,” Govender said.

“The debilitating impact will extend to the sectors covering scholar learner transport and intercity long-distance services and tour operators, with possible wide-ranging impacts on mobility and travel.

“It is therefore critical that the government and in particular the Department of Transport, the Minister of Transport and the Treasury urgently engage with Saboa and related industry associations to seek mechanisms to mitigate this uncharted environment relating to record-high fuel prices. Saboa will continue to engage with the National Department of Transport and seek engagement with the Ministry of Transport, to explore options for mitigation and further relief so that the public and commuters can still be able to access safe, reliable and affordable public transport,” Govender said.

BigFoot Express Freight COO Denesh Singh said South African consumers should brace themselves to pay more for food, transportation, and other basic necessities in light of the fuel hike.

Singh said that despite a last-minute reprieve by the government to extend the R1.50 general fuel levy, which prevented an even higher fuel increase, South Africans were in for a bumpy ride.

“The logistics sector has been battered over the past few months by wave after wave of fuel increases and for many companies to stay afloat, they will inevitably have to pass on these increases to the consumer,” Singh said.

He pointed out that the taxi and security industry has already moved swiftly to increase their fuel levy prices to consumers and consumers who are increasingly relying on courier services to deliver online shopping purchases at their doors or people using freight services should expect increases to those services.

“No South African will be spared from the latest fuel increase. The fuel increase will have an impact on every business in the transport and logistics sector and very few to almost none will have the ability to absorb this massive increase. Unfortunately, South Africans are going to pay more for food, courier services, transport, and freight haulage,” Singh said.

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