Petrol price increase will hit strapped SOEs, says Gordhan
Politics / 3 October 2018, 08:47am / MAYIBONGWE mAQHINA
Johannesburg - Public Enterprises Minister Pravin Gordhan says the fuel price increase will significantly affect some state-owned entities (SOEs) falling under his ministry. In a written reply to a parliamentary question from the EFF’s Marshall Dlamini, Gordhan said cash flow was likely to be impacted as operational costs increased. His reply came hours before motorists paid nearly R17 a litre for petrol and R15.65 a litre for diesel.
On Monday, the Energy Department said fuel prices were adjusted monthly, informed by international and local factors.
In his parliamentary question, Dlamini wanted to know what the impact of the fuel price increase would be on the turnaround of the SOEs.
Gordhan said that despite fuel consumption monitored daily at Alexkor, the price had had an impact on cash flow, hence the strict monitoring of fuel consumption.
“The increase in the fuel price will put a significant strain on the company and negatively affect its financial sustainability.”
He said Denel had in the 2017/18 financial year spent R6 503 836 on fuel.
“Although the level of business activity in the financial year in question was relatively low, the financial impact was significant given the cumulative percentage increase in the fuel price during the period.”
There was no doubt that with the latest fuel price increase, the situation would worsen.
“Furthermore, the impact will increase more significantly if the level of business activity increases as envisaged in the mid to long-term,” he said.
The minister said Safcol (the SA Forestry Company Ltd) was negatively impacted by the continued fuel price increase.
“This will result in lower operating margins and cash flows for Safcol, which will ultimately delay the achievement of its strategic objectives.” Safcol is already forecasting an increase in direct costs of about R8860254.
In the case of SA Express, the cost increases would “make the turnaround difficult to achieve”.
Gordhan also said the fuel price increase would impact on Transnet’s operational and financial performance.
“Based on estimated annual fuel use, net of recoveries from freight customers, and excluding the impact to the regulated parts of the business, an increase of R1 in the price of will result in a decrease in Transnet profitability of about R120million a year,” he said.
Turning to Eskom, Gordhan said an increase in fuel prices above budgeted levels would result in cost overruns.
“Implications of fuel price increases to the turnaround plan are that targeted areas of cost reduction would be squeezed to provide further savings, since the fuel cost increases would erode these savings.”
Eskom spent R3.037 billion on fuel-related products in 2017/18.
“As long as future fuel price increases are below inflation levels, there should be no risk to the turnaround initiatives being driven within Eskom at this point,” he said.