By TJ Strydom for Business Live
Motorists will this week get their steepest increase at the pump in four years as the recent slide in the rand and higher global
oil prices are passed on and a hike in government levies takes effect.
The retail price for 95 octane petrol is set to rise R1.31 per litre inland on Wednesday and R1.26 on the coast, the Central Energy Fund (CEF) said on Saturday. Diesel prices will rise about 82c.
The increases will pile pressure on consumers who are reeling from a value-added tax increase in 2018 and face
another bout of electricity price hikes. Prices rise 14% for direct Eskom customers on Monday and for a similar amount for municipal customers on July 1.
Fuel price hikes usually have a second-round effect as wholesalers, retailers and other service providers gradually pass the increases on to their customers. And the hikes are notoriously “sticky” when it comes to inflation — taxi fares that rise when fuel becomes more expensive do not necessarily fall when prices at the pump
Petrol at R16.13 per litre is still cheaper than it was as recently as December, but the increase is the harshest since April 2015, according to data from the Automobile Association.
With weak economic growth and the turmoil at the SA Revenue Service contributing to an expected revenue shortfall of more than R42bn and personal and company taxes at their
limit, the Treasury has shifted increasingly to other avenues for taxation. Government-imposed levy adjustments account for 20c per litre of this week’s increases, with 15c going to the fuel levy and 5c to the Road Accident Fund. These increases were announced by finance minister Tito Mboweni in his budget in February. Roughly a third of the amount motorists are charged go to these coffers.
“With effect from 3 April 2019, the fuel levy in the price structure of petrol and diesel will amount to 352c per litre and 337c per litre respectively. The Road Accident Fund levy in the price structure of both petrol and diesel will amount to 198c per litre with effect from 03 April 2019,” the CEF said.
The fund said the weaker rand, which on average depreciated from R13.80 in the previous month to R14.39 in the latest month, and higher global oil prices were responsible for the rest of the hike. When the Bank announced its interest rate decision last week, the size of the increase was already easy to forecast using CEF data.
Though consumer price inflation is comfortably within the Bank’s target, it flagged global oil prices and the effect it will have on domestic fuel costs as one of the upside risks to its inflation outlook when it left the repo rate unchanged at 6.75%.
Fuel prices, along with higher food and electricity costs, were expected to lift inflation over the medium term, Bank governor Lesetja Kganyago said.