South Africa’s biggest fuel price hike since July last year is expected to come into effect in April, with the Automobile Association (AA) on Monday predicting petrol will increase by R1.16 a litre and diesel by 92 cents a litre.
Read: Petrol at R15 per litre – or R20? (Jan 18)
The surge in the global Brent crude price to almost $70 a barrel (an almost two-year high) and the weakening rand are largely to blame.
However, 26 cents of the anticipated increase is linked to the annual hike in the General Fuel Levy (GFL) and the Road Accident Fund (RAF) levy announced by Finance Minister Tito Mboweni in the budget in February.
The overall spike is expected to drive up inflation, which hit the lower end of the South African Reserve Bank’s (Sarb’s) 3-6% target in recent months in the wake of the Covid-19 pandemic that induced global trade and travel restrictions.
While the increase will hit consumers and business, it is also likely to influence the Sarb to keep interest rates steady for the rest of the year and possibly increase rates sooner.
“These [fuel price] increases will exacerbate the already dire financial positions of millions of South Africans,” the AA said in a statement, following the release of latest unaudited mid-month fuel price data by the Central Energy Fund.
“Steepening climbs in international petroleum prices are being worsened by a dipping rand/US dollar exchange rate, painting a grim picture for local fuel prices.
“The forecasted increases are worrying and could have a severe impact on an economy already reeling from a number of negative factors, including corruption, overspending on the civil service, and the largest contraction in a century,” it said.
“As things stand today, petrol is set for a 90 cents-a-litre rise, diesel for an increase of 66 cents, and illuminating paraffin an increase of 62 cents,” the AA pointed out.
“These expected increases do not include the 26-cents a litre increase to the GFL and RAF levy … which come into effect in April,” it added.
The organisation also noted the one-cent increase to carbon tax.
“Within the current scenario, with the addition of the levies, petrol is expected to increase by a whopping R1.16 a litre and diesel by 92 cents a litre,” said the AA.
“With the expected increases factored in, a litre of 95 ULP Inland [currently at R16.32/l] will now cost R17.48/l of which R6.10 will be taxed through the GFL and RAF. This means that at least 35% of the cost of a litre of this petrol will be taxed.
“The price of diesel [currently pegged at R14.12/l] will increase to R15.04 of which R5.96 [including increased levies] will be taxed – or at least 40% of the total cost,” it added.
And things could get worse …
The AA said that either the rand or international oil prices will require a sharp reversal if the picture is not to deteriorate further by month-end.
“The rampant upward march of international oil prices has quickened alarmingly in the first weeks of March. The basic fuel price for petrol, for instance, shot up from R6.55 a litre at the February close-out, to R7.40 a litre in the first two weeks of March,” it explained.
“Over the same period, the average rand/US dollar exchange rate weakened by about 30 cents.”
The AA warned that the government “can no longer ignore” the knock-on effects of severe fuel price rises.
“The cost is not only direct, but throughout the value chain, and is battering consumers from all sides. It requires urgent review to help ease pressure on consumers who are battling to stay financially afloat,” it said.