As South Africa celebrates Workers Day with a public holiday on Monday, consumers are set to scramble once again as another hefty fuel price increase looms later in the week.
With the Department of Energy and mineral resources set to announce adjustments to the fuel prices later this week, early data from the Central Energy Fund (CEF) suggest an increase of between 40 and 50 cents per litre for petrol, with diesel showing a possible decrease of about between 40 and 65 cents.
A 50 cent petrol price increase will raise the cost of 95 Unleaded to R22.82 at the coast and R23.47 inland, where 93 Unleaded will rise to around R23.14.
Illuminated paraffin prices are looking set to come down by around 32 cents or more.
Petrol prices remain historically high in South Africa, with the price of a litre of 95 Unleaded having increased by more than R5.50 in the past two years and by around R9 in three years.
South Africans have been feeling financial pressures all year, having to contend with the cost of living crisis in the country.
Consumers in South Africa could be in for a tough few months ahead as the SA Reserve Bank (SARB) looks set to ramp up its interest-rates hiking cycle in a bid to curb the stubbornly high inflation as food prices rose the highest in 14 years.
Data from Statistics South Africa (StatsSA) released last week showed that the headline consumer price inflation (CPI) rose for the second month in a row in March, which could force the SARB’s hand for another interest rate hike in May.
StatsSA said inflation edged higher to 7.1% year-on-year in March, from 7.0% in February and 6.9% in January.
This was against market expectations of a 6.9% drop, meaning that inflation was still above the upper limit of the SARB’s target range of 3%-6%.
Core inflation was flat at 5.2% year-on-year, and had monthly pressure of 0.8%.
To rub salt into the wound, the South African Poultry organisation also said that the one source of protein that has remained fairly low, pricing wise, could see a spike in prices as farmers battle to deal with the fallout from Eskom’s load shedding and the tariff increase coming into effect.
Meanwhile, Agricultural Business Chamber (Agbiz) chief economist Wandile Sihlobo said that the current surge in rice prices was likely to be temporary.
The agricultural organisation said that from a volume perspective, South Africa imported about 1.1 million tons of rice annually, and the 2022/23 volume remained unchanged from the previous season. The current global rice price trend and the rand/dollar exchange remained vital variables to monitor in the coming months.
“Still, with the prices of maize and wheat products set to moderate in the second half of the year, consumers may reduce their rice consumption if its prices remain elevated this year,” Sihlobo said.
As the demand for rice firmed and the large stocks from the 2021/22 season depleted, the impact of the high consumption levels translated into increasing prices. Agbiz said that according to data from the International Grains Council, the 2022/23 global rice harvest was down by 1% from the previous season at 509 million tons.
Industry experts also warned that there is no respite for South African consumers facing high food prices for now.
Consumer food price increases were likely to remain sticky at relatively higher levels for the coming month, which would likely be a peak, Agbiz said.
Paul Makube, a senior agricultural economist at FNB Commercial, said the latest inflation data showed no respite for consumers as headline consumer price inflation inched 0.1 percentage point higher to 7.1% y/y in March 2023 from 7.0% y/y in February, according to the update from StatsSA.
In the food basket, the bread and cereals category still posted the highest increase of 20.3% y/y, although below the 20.5% y/y pace recorded in February this year.
The agricultural economist said unrelenting cost pressures emanating from load shedding would continue maintaining the stickiness in food prices in the short term.
“However, monthly prices on both the domestic and international markets continue to trend on the downside, which has the potential to limit further upside in consumer prices in the second half of 2023,” he said.
Due to the cost of living crisis, South Africans have adjusted monthly budgets and searched for cheaper alternative grocery products to stretch their rands further every month.
There was also a difference in travelling behaviours.
This was according to the Fuel Retailers Association who said that less travelling by South African motorists harmed fuel retailers volumes and their profitability with thin margins.
This was because fuel businesses depended highly on volumes pumped, says Fuel Retailers Association CEO Reggie Sibiya.
According to the fifth annual Summer Spending survey by short-term lender Wonga, as many as 78% of South Africans planned to stay at home last summer, with 47% citing affordability as one of the major factors impacting their travel plans.
The FRA told the Business Report that it has always maintained that fuel retail volumes would never recover to pre-pandemic volumes due to the nature of less travels by motorists due to unaffordability driven by high cost of living and reduced employment and reduced income. It said that however, with the increase seen in new and used car sales, that still gave some hope if usage of those cars on the road would increase. It added that although diesel has been showing some drop in international prices, the overall cost of fuel still remained high, affecting both consumer consumption while driving retailer costs up especially those linked to pump price like credit cards.
Sibiya said that in general fuel retailers were a very resilient bunch and because of this they were often mistaken as being wealthy which was far from the truth. “Retailers are just collectors of about 90% of their revenue for government levies and taxes and oil companies rentals and royalty fees. Of the remaining 10% majority covers expenses which are under-recovering and leaving the net profit per litre even lower that the allocated 32.8cpl,” Sibiya said. | Additional reporting by Given Majola
BUSINESS REPORT