The department of energy has released the official fuel price changes for January 2016, which will see a small drop in 95 LR petrol, and massive drop in the price of diesel.
According to the Central Energy Fund (CEF), these are the changes in fuel price:
93 LRP – no change
95 LRP – 3 cent decrease
Diesel 0.05% Sulphur – 76 cent decrease
Diesel 0.005% Sulphur – 78 cent decrease
Illuminating paraffin – 84 cent decrease
“The average international product prices of Petrol, Diesel and Illuminating Paraffin decreased during the period under review,” the department said.
However, this was offset by the rand weakening against the US Dollar, on average, when compared to the previous period.
“The average Rand/US Dollar exchange rate for the period 27 November 2015 to 30 December 2015 was 14.8819 compared to 14.0938 during the previous period.”
“The weakening of the Rand against the US Dollar increased the contribution to the Basic Fuels Price on petrol, diesel and illuminating paraffin by 29.26 c/l, 25.21 c/l and 25.81 c/l respectively,” it said.
Some relief for consumers
While the 78 cents a litre decrease in the diesel price is going to bring some relief to battered consumers who depend on road transportation to convey most of the commodities they consume including food, the impending increase in the price of food is going to offset this drop.
The 3 cents a litre drop in the petrol will have hardly any effect at all.
Neil Roets. CEO of debt management firm Debt Rescue, said the decrease could have been substantially more had it not been for the drama surrounding the dismissal of the previous finance minister and the impact it had on the South African currency.
“The problem is that the severe drought in especially maize producing areas is going to lead to substantial increases the price of all foodstuffs including staples like maize and wheat.
“The government is between a rock and a hard place because it is unable to balance its budget by cutting state spending while taxes are no longer covering the glaring shortcomings in the budget.
“Corporate tax is already among the highest in the world and it would severely impact the economy if Pravin Gordhan decides on an increase in this sector.”
Independent economist Dawie Roodt said tax on individuals had also pretty much reached its limit because there are simply not enough rich people in the country to fund an increase.
“What we are left with is VAT and while this would be the most equitable tax because it taxes everybody, the mainly black and poor electorate will simply not stand for this.”
Roodt said the same tactics that brought the government to its knees on the issue of university fees would be used to put a stop to an increase in VAT.
“We will see riots the likes of which have never been seen in this country if government increases VAT even by a modest amount.”
Roets said there was a host of other increases coming down the pipeline that were going to massively impact on consumers who are already vastly over indebted.
“Eskom wants to hike electricity prices again and has made a submission just in time for the festive season that economist Mike Schussler says may lead to a 17% increase next year.”
Despite government’s promise to universities that it would not increase fees, this will not affect school fees which have been steadily rising from year to year.
“The unemployment rate of 25.5% is also indicative of the fact that it is belt-tightening time for consumers.
“Our massive unemployment rate which in reality is closer to 40% if people who have given up looking for jobs are taken into account, accentuates the reality that all South Africans are in for a very rough ride.”
Roets said the fact that most consumers owe more than 75% of their monthly salary cheques to financial institutions shows just how dire the situation actually is.
“There is no way to put a positive spin on these figures. The country is broke, consumers are broke and even slight price adjustments in the fuel price is going to have little or no impact.”
Roets said his company was seeing double digit increases in its growth rate largely because of the growing number of deeply indebted consumers who were seeking relief by going under debt review.
“Debt counselling remains the best way for consumers to manage their debt load by negotiating with creditors and paying off their debt in smaller instalments over a longer period of time.
“None of their assets may be attached by debt collectors while they are under debt review,” Roets said.