The rand has slumped amid ratings agency Moody’s warning that the pace of fiscal consolidation in the nation had slowed.
“Almost two months of modestly improving rand strength ended in a dramatic reversal as the local currency was caught up in the emerging market chaos triggered by Turkey’s economic difficulties,” the AA said.
“Until the crisis hit, the fuel price picture for August had been flat, with data predicting modest declines in all fuel types at month-end, thanks to reasonable stability in the rand and international oil prices.”
The AA said the mid-month data suggested a fall in petrol of around 2c, with 4c and 8c drops predicted for diesel and paraffin, respectively.
However, the daily exchange rate for the rand fell nearly 9% against the US dollar in two days after the news of Turkey’s troubles broke.
This tipped petrol towards a likely increase at month-end, and substantially offset the gains made by diesel and paraffin, the AA said.
The fuel price trajectory towards the end of the month would depend on factors largely beyond SA’s control, it said.
“Turkey is resisting tighter fiscal policy and an end to the standoff with the US over the detention of an American citizen,” the AA said.
Investors tended to regard emerging markets as a single basket meaning further negative news out of Istanbul is likely to be bad for the rand and SA’s fuel users too, the AA said. It advised motorists to economise where at all possible.
“The extent and duration of the recent currency weakness will be pivotal in SA’s short-term fuel price outlook,” it said.
At the beginning of the month, cheaper international oil prices slammed the brakes on significant increases in fuel prices. The price of both grades of petrol increase by 1c a litre, while diesel went down by 4c a litre, taking the per litre price of 95 octane unleaded petrol to R15.54 on the coast and R16.03 inland.
Meanwhile, motorist Enra Smit said: “It is absolutely insane how much fuel costs in SA. Why does Botswana and other countries have it so much more cheaper yet petrol is produced here?”
Motorist Dimakatso Seleke said: “The government fails dismally. The poorest of the poor are suffering the most.”