POLOKWANE – Local economist Baneng Nape says residents will feel the impact of the ongoing conflict in the Ukraine on the local economy at short, medium and long term intervals.
Nape says there will be a spill over effect at a local level on energy, fuel and electricity, but more so on the fuel price because the price per liter is determined by a number of international elements.
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“We import oil from Russia so there will be a decrease in our import levels because major ports have closed down or have been damaged due to the war. Due to this, the price of crude oil has gone up because there is a higher demand than the supply available,” he said.
Nape added that there are many other raw materials that are used in the production of goods which are also imported and because of the war, the supply of these materials has seen a dent.
“National elements only contribute 40% of our fuel price whereas the other 60% is determined by international elements such as the availability of crude oil and the exchange rate. Another element is that when our rand weakens against the US dollar, the price of fuel will also increase.”
Nape says this is why other experts are anticipating the fuel price will increase to R40 in the next few months. “At this point, the price of fuel has already increased which is a short term effect.”
He says an increase in other factors such as the international trade rate, transportation and inflation will affect the ordinary citizen.
According to Nape, the central bank will try to hike interest rates when inflation rises to try and curb it, which is already in the pipeline.
“This will have adverse effects on financial consumers because the cost of borrowing will go up and this includes all credit such as mortgage loans, credit cards and any kind of loan.”
He added that an increase in the fuel price will not only affect motorists, but public transport users as well because fares will most likely also increase.
“The price of goods and services will also increase based on the fuel price because all these rely on fuel for transportation.”
