Cape Town – If there is one economic nuisance consumers would rather not hear, it is that of ever skyrocketing fuel prices.
Although economists would want consumers to believe that some ‘cheating’ by petrol barons every now and then, can cheapen the costs, the reality turn to prove otherwise.
For-instance, take the latest revelation by a leading South African economist, who this week warned that consumers should prepare for another price shock in December when the price of fuel is expected to skyrocket.
According to independent economist Dawie Roodt, thanks to the plummeting rand and rapidly increasing crude oil prices.
South Africans can expect to pay as much as 70 cents a litre more for petrol in December. While diesel will increase by around 60 cents a litre.
“The political and economic instability in South Africa is going to keep our currency volatile. I believe that further increases in the crude oil price are likely with a further decline in the value of our currency virtually inevitable,” said Roodt.
Conversely, Neil Roets, CEO of debt counselling firm Debt Rescue, said the fuel price increase comes at a time when consumers can least afford it.
“More than half of all South Africans are three months or more behind in their debt repayments, collectively owing some R1.71-trillion in debt,” he said.
Roets said that it is highly likely that the ratings agencies will announce downgrades to the country’s sovereign debt to junk status before the end of the year. According to Roets, this will further impact on the rand.
“Consumers should brace themselves for hard times ahead and face the fact that all of us are now going to be collectively punished for our government’s inability to grow the economy and create prosperity for all South Africa’s people.”
Roets said the continuous increase in the diesel price was especially bad news because virtually all consumer goods were transported by road and would result in higher prices across the board.
“We have reached the point where consumers simply have to face the fact that they cannot maintain their lifestyles as they did in the past. It has now become a matter of survival.
“Year by year our unemployment figure goes up with the World Bank claiming that 27.7 percent of all South Africans who want to work are unemployed. Even worse is the fact that 39 percent of all unemployed South Africans have never worked before. Among young people this figure is even higher – at 60.3 percent. The numbers also highlight that many young people struggle to find their first job,” Roets said.
The debt expert said the gravity of the situation was reflected by the fact that Debt Rescue was showing a year-on-year increase of almost 25 percent in clients who wanted to go under debt review because they could not repay their debts.
Meanwhile, the Automobile Association (AA), commenting on unaudited mid-month fuel price data released by the Central Energy Fund (CEF), said earlier this month that the steep increase was due to a number of factors including the rand’s one-year low to the dollar and heavy increases in international oil prices.
The AA further noted that the data indicated that motorists could expect to pay an increase of 74 cents for 95 petrol, and 75 cents for 93 petrol.
Diesel is expected to increase by 63 cents. The association further cautioned that the picture may worsen before the end of the month.
“We cannot ignore signs that South Africa may face a further round of downgrades by ratings agencies, possibly even before December,” the AA added. The latest Bloomberg fuel index, which was updated October 31, this year, shows that South Africa still remains one of the most expensive countries in the world to keep tanks full.
Bloomberg’s data ranks 61 countries by three economic measures to see which has the most affordable fuel and which countries feel the most pain at the pump.
“While South Africa ranks as having relatively cheap fuel on a cost-per-litre basis (the 18th cheapest, in fact), our penchant for travelling long distances, coupled with low average salaries and a high cost of living, means that we spend a much higher portion of our annual income on keeping tanks full than almost anywhere else,” it said.