The rand dollar exchange rate, crude oil prices and international product prices were just some of the reasons given by the National Department of Energy for tomorrow’s (Wednesday 3 July) fuel price increase that will see consumers pay 84c a litre for petrol.
In a statement Thandiwe Maimane, spokesperson of the department of energy, said the rand weakened sharply against the United States (US) dollar and contributed to an increase in the basic fuel price(BFP) by at least 57 cents per litre.
“The weaker rand is mainly attributed to the slowdown in the economic growth in emerging markets and the expected slump in the demand of commodities. The rand’s vulnerability was also due to negative sentiments emanating from concerns over anticipated labour disputes and market expectations of industrial actions,” said Maimane.
Econometrix economist, Laura Campbell, said the rand’s depreciation over the past months has been the steepest amongst emerging market currencies since the beginning of the year.
“Inflationary pressures on the back of the depreciation of the rand exchange rate are set to continue to filter through into raising prices at the consumer level more generally,” said Campbell.
She added that consumers should brace themselves for even more price hikes this year because of the ongoing weakness of the rand exchange rate.
In a May report, Campbell also predicted the upward pressure on inflation for June and July as a result of the steep falls of petrol price in those months last year.
How will the new petrol price affect us?
Jason Garner, management consultant at Acsis, said the latest petrol price increase will add further pressure to consumers’ already burdened finances if the necessary measures are not taken.
Garner pointed to the latest BankservAfrica disposable salary index, which revealed that consumers’ spending power is shrinking. The data showed that households’ disposable income has only risen by 3.8% over the past three months. This is below that of inflation, which was at 5.6% in May.
He said the reality is that people’s salaries were not going up with their expenses. The option would be to cut back on either expenses or luxuries.
“An increase in the petrol price often results in a knock-on effect on the price of most goods and services, such as food and public transport. It is important that, in light of these increases, consumers improve their ability to spend within their means and save accordingly to cope financially without having to rely on credit cards, overdrafts or any other form of debt,” said Garner.