Permanent fuel price solutions needed for SA to avoid a disaster

Although the recent fuel levy reduction is welcome and will soften the blow for consumers, it is simply not enough to balance the pain when paying for fuel, and the indirect impact of increased transport costs on goods.

South African consumers have been struggling with consistent petrol price hikes since January 2021, when they paid only R14.99 for 95 octane petrol. As of Wednesday they are paying R21.96, which is a massive increase of 46.5% over a 15-month period, and all indications are that prices will keep rising in the months to come.

Wednesday’s fuel price increase also included a slate levy increase of 6.56 cents per litre. The slate levy is effectively a self-adjusting mechanism government uses to deal with daily differences in petrol prices.

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A year of fuel price vows instead of solutions

“South Africans had to dig deep over the past year to survive the constant price hikes in fuel and manage the repercussions on their lives. It is simply no longer sustainable. The latest price increase will surely drop them even deeper into an abyss that they cannot crawl out of,” says Neil Roets, CEO of Debt Rescue.

The temporary reduction in the general fuel levy of R1.50 per litre between 6 April and 31 May will help consumers in the short-term, but although government is considering a number of solutions that include a review of the basic fuel price, we have to know if this will bring relief at the pumps?

Deregulation of the petrol price will be a positive step in the right direction, but not everybody likes this either, saying that the possible consolidation of the retail fuel sector will prevent smaller players from competing, while larger ones will grab greater market shares by cutting margins through bigger volumes, Roets says.

Although he welcomes any move by government to rescue consumers, he says it may be too little too late as government cannot save consumers who have been hit with consistent petrol price hikes for over a year.

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The consequences of increases

The previous price hike was already evident in the Household Affordability Index food basket of the Pietermaritzburg Economic Justice and Dignity Group for March, which increased by R94.39 to R4 450.09, an increase of 2.2% compared to February.

With all indications that Russia’s war in Ukraine will worsen, consumers will be hit even harder in the coming months.

“The expected increase in the price of wheat is one of the biggest threats that is expected to push up local bread prices. Bread is a staple food for average South Africans.

“The situation is out of control and consumers are running out of ways to survive. For many, the only way out seems to be more credit and who can blame them?” 

However, Roets says more credit will only exacerbate the situation, leading to a debt trap that is difficult to escape from.

Debt Rescue has seen a year-on-year increase in the number of South Africans seeking debt relief.