Wednesday’s petrol price increase is likely to be the catalyst for another set of price hikes across the country over the coming months.
Petrol 93 and 95 will be subject to an 81 cents per litre hike, while diesel 0.05% increases by 58 cents and diesel 0.005% by 59 cents per litre. Illuminating paraffin increases by 59 cents per litre.
The main reason for these increases are mostly the large increase in international oil price with a small percent due to the volatile exchange rate, says Dawie Maree, head of Information and Marketing at FNB Agribusiness.
“This is unfortunate news for producers and consumers in the sense that transport cost will definitely increase due to this, which will have a negative effect in disposable income of the consumers.
“On the producers side, February is normally a quiet month in terms of grain production, but we expect that producer inflation will increase in the coming months. There is an expectation of further food price increases as well.”
These latest price hikes, which follow months of successive increases, will put further strain on consumers who have to contend with higher costs across the board, including for electricity and food, said Neil Roets, chief executive of Debt Rescue.
“While the rand is performing relatively well against the dollar, which has softened the financial blow to some degree, the international price of Brent crude has increased, and is having a knock-on effect on local fuel costs.
“This affects the whole supply chain of transport, goods and services, and adds impetus to a rising financial tide that is negatively impacting consumers,” he said.
Roets said that the ‘ripple effect’ will be significant. He added that the impact is compounded by consumers who continue to suffer in the face of the Covid-19 pandemic, with millions having lost their jobs during the past year.
While government’s R350 grant was a lifeline for many, this has come to an end for now, meaning those without jobs and/or limited incomes, will feel these price hikes even more, he said.
“Compounding this issue is the fact that the cost of a taxi or bus ride will rise, making it more expensive for millions of South Africans to seek, or get to and from work.
“Many – as much as 30% according to Old Mutual Savings and Investment Monitor – also turn to buying food on credit during these times, which might add some immediate relief, but has long-term consequences due to the steep interest rates it incurs, adding to further debt woes,” said Roets.
Eskom is expected to put further pressure on South Africans, with recent reports indicating that the flagging SOE could increase tariffs by as much as 50% to generate funds in an attempt to keep the lights on.
Finance minister Tito Mboweni is also expected to announce range of tax increase in his February Budget, including a possible vaccine tax.
“Whichever direction consumers look, price increases are on the cards. And while there is some relief in an unchanged repo rate – for the time being – the cost of living continues to climb,” Roets said.