What diesel increase means for consumers

Today, the cost of diesel for transporters increased by R2.76 for 500ppm and R2,84 for 50ppm. That will raise inland pump prices to R23.05 and R23.28, respectively. The price of 93 and 95 grades of petrol will increase by R1.71 per litre.

The Central Energy Fund attributed the price hikes to rising international fuel prices and the weakened rand. These prices were last seen in June 2022, the first in a four-month climb that saw diesel prices reach the lofty heights of R25.74/l in November 2022. July 2022 had also reached R25/l.

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Road freight transporters use both petrol and diesel – but diesel is the main fuel in most road operations. Once fuel prices increase, transporters will need to increase their pricing to cover the increased cost of diesel.

While this sounds like an easy or simple process, there will be transporters who won’t be able to increase costs (either they are contractually bound or they just price themselves out of the market), and thus might not be able to carry on with their business.

Delayed payments for work

One of the biggest challenges for transporters is the need to fund operations (the use of fuel) while only being paid months after the work has been done – in some cases up to three months afterwards.

In the meantime, the next load needs to be moved, and so on, and that all needs fuel. There just aren’t limitless reserves of cash to continue the high level of fuel expenditure against the delayed payment for work done.

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The Road Freight Association is hearing from more and more of its members how the fuel cost strain is affecting survival – with more and more businesses in stress or business rescue, while customers reduce volumes that need to be transported or even curtail stock movement.

Transporters will feel this impact on their businesses. Many will not be able to muster the guarantees required for purchasing fuel on credit.

This is required as customers take up to 90 days to pay after the transport has been provided – and the transporter has paid for fuel, paid the driver, covered other costs and still needs to operate a business – while others just don’t have any cash to carry themselves for 90 days.

Whether we like it or not, the continuous increases in the price of diesel inevitably drives the cost of transport and logistics up – step by step. And, with roughly 85% of all goods moved through and around SA having a road leg at some part in the journey, there’ll be increases to consumers, as the cost to transport goods increases.

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Fuel breached the 50% mark in daily operating costs during the third quarter of the year. Now, as we head into the final months of 2023 – with this 3.6% increase – the sector is heading towards the 60% level seen during the last months of 2022.

That’s a huge increase in cost to company (any company or business that requires goods to be transported to manufacturing, processing, packaging, staging, distribution or retail operations) that simply cannot be borne by the company.

Tight financial squeeze

That cost will – in most cases – be borne by the consumer. You and I will pay more for – well – everything. From food to fuel, from clothing to electronic goods and everything in between.

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And, should an interest rate increase occur: that, together with transportation costs for goods and services, will grip the consumer in another tight financial squeeze just before the festive season.

-Kelly is chief executive: the Road Freight Association