Fuel hike will harm battered consumers
Johannesburg - A hike in the fuel price would harm financially-stressed households, the Institute for Race Relations warns.
The institute says in a statement that, should the rand and oil remain at current levels, motorists could expect a fuel price hike of 41c/litre in April. Such an increase, added to the hike in the fuel levy of 30c a litre - which kicks in from next Friday - could see motorists paying between 70c/litre and 80c/litre more for fuel, it says.
According to the latest figures from the Central Energy Fund, both grades of petrol are being under recovered by almost 90 c a litre, while diesel is being under recovered by between 70 and 76 c a litre.
The widely-anticipated fuel price hike will be announced next Friday and comes into effect at midnight on the first Tuesday of each month.
Currently, the rand is trading just north of 15 to the dollar, having come under pressure along with other emerging markets after the bomb blasts in Brussels, while the spot oil price is at just more than $38 a barrel.
Read also: Oil prices ease
Oil prices have eased because of global oversupply and a crucial producers' meeting in Qatar next month, which could see production limited to prop up the price.
However, South African consumers are already facing several price pressures, including a recent increase in the prime lending rate to 10.5 percent, after the reserve bank hiked the repo rate by 0.25 percent earlier this month.
IRR Chief Economist Ian Cruickshanks warns that such a fuel price increase would put further pressure on financially stressed households, which are already dealing with the interest rate hike.
Read also: Big fuel price increase likely in April
Cruickshanks said that increases in fuel prices and interest rates should be read together with anticipated increases in food prices. He said that the latest estimates from the South African Crop Estimates Committee suggested a maize harvest of just over 7 million tonnes this year – down from almost 10 million tonnes in 2015. The reason, according to the committee, is the lowest rainfall in growing areas for more than 100 years.
According to the IRR potato prices – as just one example - were at record highs and Cruickshanks said this fact “brought home the full impact of the drought”.
Food prices have been skyrocketing and annual consumer price index (CPI) food price inflation is now expected to peak at 11.6 percent in the final quarter of 2016, compared with 11.3 percent previously.
Food inflation is feeding overall inflation, which came in at 7 percent for February, up from 6.2 percent previously, Stats SA said on Wednesday. This is an almost seven-year high.
The IRR says the stresses being placed on the economy could be read in the lead indicator of the Reserve Bank, which has reached its lowest point since November 2009 and wholesale trade numbers which must be expected to continue declining.
Cruickshanks says, in the absence of a global recovery and domestic policy reform the only way out of the mess was for the Government to realise, “it has no choice but to start living within the country’s means which we have not seen since Trevor Manuel vacated his post as minister of finance”.