Home South African Economists, unions warn of devastating impact of fuel price shocks ahead

Economists, unions warn of devastating impact of fuel price shocks ahead

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A shocker of an almost R2 price increase on fuel awaits consumers next month and analysts, economists and trade unions fear it will have a devastating impact.

File picture: Doctor Ngcobo/African News Agency (ANA)

A SHOCKER of an almost R2 price increase on fuel awaits consumers next month and analysts, economists and trade unions fear it will have a devastating impact on transport and food prices.

This comes as the prices of bread, sunflower oil and other household products have rocketed as a result of Russia’s war with Ukraine and speculation that the interest rate is set for a further hike, which would increase the cost of loans and bond repayments.

News of the fuel price blow came in a stark message from the Automobile Association (AA) based on current unaudited data from the Central Energy Fund (CEF), which pointed to massive fuel price increases across the board for June.

The AA said, based on unaudited data from the CEF, that petrol was expected to increase by between R1.93 and R1.97 a litre, diesel between R1.60 and R1.62 a litre, and illuminating paraffin by a whopping R2.14 a litre.

“We are rapidly nearing the end of May and the fuel outlook is looking bleak. The government needs to address this issue sooner rather than later; consumers are anxious about what lies ahead and the government should allay these concerns by indicating as early as possible what steps it will be taking to mitigate rising fuel costs,” the AA said.

It said consumers could face further pressure because the government’s relief action in reducing the general fuel levy ended this month, and once the levy returned it would result in price shocks not seen before.

In late March, the government reduced the fuel levy by R1.50 for April and May. This brought temporary relief to consumers.

The Federation of Unions of South Africa (Fedusa) has condemned the anticipated fuel hikes and called for the immediate extension of the fuel levy relief.

General secretary Riefdah Ajam said they were seriously concerned by reports of fuel price hikes.

She said it was an unnecessary economic burden that workers and the country could not afford in the current economic climate as the country attempted to claw its way back to pre-pandemic levels.

Ajam said the extension of the government’s emergency fuel levy relief would cushion the blow for workers and businesses, and that a lasting solution should be found to fix the unacceptable high prices.

She said that while the macro-economic and external market forces were acknowledged, further government intervention was needed to avoid panic buying.

Russia and Ukraine are top suppliers of the global key staple foods. Both countries account for more than 30% of the world’s wheat exports, 17% of maize and 32% of sunflower oil. The war in Ukraine has resulted in the price of commodities soaring in South Africa and elsewhere.

Last week, the provincial Agriculture Department made a presentation to the legislature in which it was said that during the 2021/22 season South Africa was estimated to have imported 1.47 million tons of wheat and there had been a shortfall of 495,062 tons.

FNB Agri-Business senior agricultural economist Paul Makube said South Africa was heading into increased activity on the agriculture calendar and demand and consumption of fuel was high.

Meanwhile, the SA Reserve Bank’s (SARB) Monetary Policy Committee (MPC) is scheduled to deliver its repo rate decision on Friday.

Absa senior economist Miyelani Maluleke said it expected the SARB to raise the repo rate by 25 basis points but foresee an elevated risk of a 50 basis points move, particularly due to the exchange rate movements since the last MPC meeting.

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