It has been a tough start to the month for consumers as the fuel hike was implemented from Wednesday 1 April, as well as an average electricity tariff increase of 8,76% for Eskom customers.
Government is scrambling to secure fuel supply for the country for the upcoming months, with reports coming in that South Africa is seeking a standard contract for a 12-month supply from Nigeria,” Roets notes. “Right now though, we only have enough to see the country through for the next few weeks.”
Neil Roets, chief executive officer (CEO) of Debt Rescue, warns that the increases are “disastrous” for consumers.
“This prices two of the most essential necessities — petrol to drive their vehicles and electricity to heat food and keep the lights on — beyond the reach of the average citizen — and this spells disaster on a level we have not seen yet.”
He warns that South Africans are fast falling deeper into financial ruin.
“It is deeply concerning that authorities are not responding more urgently to the writing on the wall.”
Any relief insight?
Despite government’s announcement to temporarily reduce the fuel levy by R3 per litre for petrol and diesel for this month, Roets said the price hikes will still have a dramatic impact on South Africans.
“Petrol is a mainstay of the monthly budget of every household, whether you are a vehicle owner or not, and many rural households still use it to fuel up their generators.
“When the price of petrol and diesel increases, it’s inevitable that other essential goods will go up in price too, with staple foods at the top of the list, as we see the knock-on effect on road and rail transport.”
The diesel debate
He said in South Africa diesel retail pricing is not regulated in the same way petrol is. Unlike petrol, where the government sets a regulated pump price that all stations must follow, diesel’s retail price is only guided by a monthly reference price.
This means that fuel stations can adjust diesel prices at any time during the month.
“It is encouraging that our government is scrambling to secure fuel supply for the country for the upcoming months, with reports coming in that South Africa is seeking a standard contract for a 12-month supply from Nigeria,” Roets notes.
“Right now though, we only have enough to see the country through for the next few weeks.”
Eskom’s dark age
Roets warns that the national power utility Eskom will also be hard hit by the diesel price hike.
The price increase will place severe pressure on Eskom’s finances for this year by dramatically increasing the operational costs of its Open Cycle Gas Turbines (OCGTs).
This forces Eskom to either fund higher operational costs or reduce usage, potentially risking higher stages of load shedding or more outages, notes Roets.
“Load shedding is something we South Africans believed we had left behind for good,” says Roets.
“Households simply don’t have the wherewithal to withstand another round of planned power outages, especially at this time when they are facing insurmountable financial challenges,” he warns.