Major petrol price storm about to hit South Africa
South African consumers are heading into a fuel price storm, with a petrol and diesel hike coming in March, possible fuel tax hikes in April, and the wider impact on transport, shelf prices and inflation likely to be felt in the months that follow.
According to the latest data from the Central Energy Fund, petrol and diesel prices are lined up for hikes of around R1.30 per litre and up to R1.50 per litre, respectively, hitting in a couple of weeks.
Higher global oil prices – driven by conflicts and tensions in the Middle East and the impact on demand – as well as a generally weaker rand, trading around R19 to the dollar, have dealt a double-blow to price recoveries, leading to the likely hikes.
Economists, meanwhile, expect that Finance Minister Enoch Godongwana is likely to announce an inflation-linked increase in fuel takes during his budget speech this week, after skipping hike for two years in a row.
The General Fuel Levy is currently at R3.95 per litre, while the Road Accident Fund is at R2.18. Should a CPI-based hike come through, motorists could expect to be paying in the region of 27 to 37 cents per litre more in taxes come April.
While fuel price hikes are painful enough for motorists and those who use public transport, the hikes send shockwaves across the retail sector – particularly the freight businesses that deliver goods throughout the country.
Road Freight Association (RFA) CEO Gavin Kelly said that, given the high cost of fuel, companies in the sector will likely have to increase their pricing to cover these increasing costs – which will invariably feed into the entire value chain.
“Any gains achieved in mid-2023 are steadily being eroded,” he said.
“Whilst we have seen fuels coming off the huge highs in 2022 and 2023, prices are definitely not where the local economy would like them to be.”
Kelley said that the continuous increases in the price of fuel inevitably drive the cost of transport and logistics up – step by step – and with roughly 85% of all goods moved through and around the country having a road leg at some part in the journey, there will be increases to consumers as the cost to transport goods increases.
“Fuel is fast crossing the 50% mark in daily transport operating costs, which remains a high operational input cost for any company or business that requires goods to be transported to manufacturing, processing, packaging, taking, distribution or retail operations.
“That cost will – in most cases – be borne by the consumer who will continue to feel inflationary price pressure in the short- to medium-term.”
The freight CEO said that, in the short term, general transport costs will rise – from food to fuel, from clothing to electronic goods and everything in between.
“There will be the inevitable price escalations – some immediately, but more so, a domino effect will ensue, the next in a long line of such domino effects that we have seen too often in the last few months.”
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