The price of petrol in South Africa is expected to approach R24 per litre in April, as the global petroleum supply is affected by Russia’s invasion of Ukraine.
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The average price of petrol around the world over the last year was R26.15 per litre, but this is no consolation for local workers whose buying power has been whittled away in a low-growth economy.
In a country with insufficient and vandalised rail infrastructure, the majority of the country’s workers commute to work by road, with taxis ferrying most to their jobs and homes.
According to Transaction Capital, which finances minibus taxi fleets around the country, taxi fares have increased by more than 9% per year since 2013.
This outstrips growth in salaries over the same period by some distance.
For an industry with overhead costs such as vehicle finance, lockdowns related to Covid-19 have placed pressure on taxi operators to increase profitability now that restrictions have eased, meaning stable or decreasing fares are highly unlikely.
Statistics gathered by earned wage access platform Paymenow show that those workers who have requested payments have done so mainly to cover their transport costs.
Paymenow was created to prevent workers from falling into the debt trap created by unsecured loans. “Taking on debt simply to cover monthly living costs is the first step to being trapped by the unreasonably high-interest rates associated with loan sharks.
“Earned wage access as a concept is designed to prevent this by allowing workers to draw portions of their earnings throughout the payment cycle to meet everyday needs or deal with financial emergencies,” said Deon Nobrega, Paymenow’s co-founder and CEO.
“We have clear evidence that without Paymenow, these workers would be short of cash and forced to approach family, friends or loan sharks just to meet basic living costs. The jumps in the petrol price are particularly noticeable when we break down payment data by reasons for the advances,” Nobrega added.
In January this year, employees signed up with Paymenow requesting advances were trying to cover commuting costs to work 46% of the time.
By comparison, only 23% of disbursed payments were used for food.
“This trend continued through February and March, where workers were spending 48% and 45% of advances on transport costs, respectively.
“Historically, not being able to meet transport costs has been a key driver of employee absenteeism and churn in South Africa, where most of those in our economy who have a formal job are blue-collar workers and financially vulnerable,” said Nobrega.
The South African government is yet to announce measures to help consumers cope.
Countries such as Brazil, Japan, South Korea and India have all announced domestic fuel tax cuts and subsidy increases to maintain affordable price levels.
South Africa protected consumers from a petrol price jump in 2018, but the protracted time frame of the Russia-Ukraine conflict looks set to test the country’s balance sheet as global fuel price hikes drive consumer inflation.
“Ultimately, South African workers cannot cover all their basic costs if input prices continue to drive inflation in the prices of basic goods.
“In a country with a poor savings rate and an economy under pressure, those without early access to their wages stand the greatest chance of falling into a debt trap and potentially losing their jobs. This will be a disaster for the country,” said Nobrega.
