Double whammy diesel hike

Johannesburg – The 53c a litre hike in the cost of diesel will not only badly affect heavily-indebted motorists who have opted away from petrol, but will also have a knock-on effect on items such as food.

This is according to Neil Roets, CEO of Debt Rescue, who says the hike in diesel and in 95 octane will offset any relief from the slightly lower price of 93 octane petrol.

On Friday, the Department of Energy announced – in a statement that was delayed as it should have been issued at lunch time – that 93 octane would become 2c/l cheaper, while 95 octane would increase by 4c/l. The biggest hike came in diesel, which gained between 51c/l and 53c/l, depending on the sulphur content.

The department noted the main reason for the price hike was the weakening of the rand against the dollar, which had a negative impact on the fuel prices of about 30c/l and slight increase in the price of crude oil, (on average), in September compared to August.

Had the exchange rate remained stable, the prices of petrol would have declined by between 25 and 30c/l and diesel would increase by 20c/l. The rand hit a peak of R14 to the dollar on September 7 before retreating to R13.20 by September 18, only to give up this gain and return to the R14 level on September 29.

The fuel price changes will come into effect at midnight on Wednesday.

The Central Energy Fund’s over- and under-recovery figures from Thursday show the department was under-recovering on 95 octane by 4.9c, and over-recovering on 93 octane by 0.9c a litre. For diesel, the department was under-recovering by between 53c and 51c a litre depending on the grade.

The AA said last Wednesday it expected diesel to increase by around 52 cents a litre, with illuminating paraffin up by 49 cents. “Petrol will see only minor changes, with a drop of around two cents a litre forecast for 93 unleaded, and a rise of four cents for 95 unleaded.”

Debt Rescue says the hike in diesel will have a two-pronged effect in that it will have a “severely negative impact” on deeply indebted consumers who collectively owe financial institutions R1.63 trillion based on National Credit Regulator figures, and will affect the price of consumer goods.

This, is says, is because virtually all commodities consumed by South Africans are moved by road.

It is not known how many of those indebted consumers drive diesel-powered vehicles, but the hike will affect around 2 million motorists who own diesel vehicles. This is about a fifth of all self-propelled vehicles on the road, according to eNatis figures.

Debt Review notes that, although South Africans don’t pay the most for fuel in the world, our fuel bill eats up a bigger portion of our annual salaries than any other country, based on a recent Bloomberg ranking.

In addition to the diesel hike, South Africa is facing several other economic challenges, including inflation that is worrying close to the Reserve Bank’s target band, a slowing economy, unemployment and power outages.

Roets notes SA’s “massive unemployment rate of 25% coupled to the fact that most consumers owe more than 75% of their monthly salary cheques to financial institutions” shows the situation is “dire to say the least”.

He also cautions that the coal strike will adversely affect the economy.

Coal miners downed tools on Sunday over wage hikes, which could pose problems for Eskom as it only has a reserve supply of 30 days.

“The fact that miners in the coal sector have decided to go on strike is going to have a massive impact on the economy depending on how long it lasts and all this against the background of a growth rate of less than 2% in the economy is basically very bad news for consumers.”

Independent economist Dawie Roodt adds consumers could be in for further price shocks as the local currency continues its slide against other major currencies.

“The coal strike is going to send a very bad message to foreign investors because the coal industry has its back against the wall with Glencore, one of the largest coal producers in the world, facing its toughest time ever.”

Glencore is facing a large amount of debt and recently had a run in with Eskom over the price it was getting for coal.

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