Following South Africa’s downgrade to junk status by several major ratings agencies, its first major impact is set to be felt by consumers with the fuel price expected to spike in May.
With the rand hovering at 13.55 to the US dollar, petrol is expected to increase by 42 cents a litre and diesel by 39 cents a litre, according to debt counselling firm, Debt Rescue.
The Automobile Association’s (AA) mid-month data is forecasting petrol to increase by up to 55 cents, diesel by around 39c/l, and illuminating paraffin by an estimated 41c/l.
Commenting on unaudited mid-month fuel price data released by the Central Energy Fund (CEF), the AA said the rand’s weakness contributed three-quarters of the expected fuel price increases at the end of the month, with hikes in international petroleum prices accounting for the balance.
“The loss of confidence by investors and the sovereign ratings downgrades by ratings agencies Fitch and S&P have led to the rand slipping heavily against the US dollar, down from around R12.35 at the beginning of the month to its current position of around R13.40.”
CEO of Debt Rescue, Neil Roets, said the increase would have an immediate impact on the prices of virtually all other goods and services because the South African economy was largely powered by diesel and all goods transported by road would reflect this increase.
“For Malusi Gigaba and other members of president Zuma’s inner circle who played down the downgrade, the harsh reality of life is beginning to kick in.
“The fuel increase is just the first of the dominos to fall. Growing unemployment and a slowdown in our already abysmal growth rate of 1.2% will soon follow as foreign investors seek greener pastures.”
The increase in the fuel price is almost entirely due to the drop in the rand as crude oil prices had actually come down slightly over the past month, Debt Rescue said.
“The rand will probably decline further in value against the dollar which is going to impact on everything from fuel to food because although South Africa is more or less self-sufficient in grains, all of the inputs such as fertilizer, pesticides and diesel have to be paid for in dollars,” said Roets.
“Consumers are already up to their necks in debt carrying a combined debt load of R1.66-trillion. With an increase in the fuel price in May there will be a commensurate hike in the prices of almost everything else because of the heavy reliance on road transport.”
Debt Rescue said that the hikes will severely impact more than half of all South Africans who are three months or more behind in their debt repayments.
Roets said that since the beginning of January there had been a marked increase in the number of consumers who sought relief by going under debt review.
“We have seen an increase of over 20% over the past several months of the number of debtors approaching debt counsellors for help.”
This is what you can expect to pay
|Fuel||April official||May official|
|0.05% Diesel (wholesale)||R11.49||R11.88|