Earlier this month, the AA welcomed the announcement by President Cyril Ramaphosa in his opening address to Parliament of a review of the fuel price formula.
Consumers in South Africa have been given some breathing space this month as fuel prices will see a slight drop in price in August.
This comes after the Department of Petroleum and Mineral Resources (DMRE) announced this past week that motorists will enjoy a drop of 15c per litre for both 93 and 95 grades of petrol.
The petrol prices were ultimately supported by range-bound oil prices and a generally stronger rand versus the US dollar – though this is no cause for celebration as economists have warned that, despite three successive petrol price cuts, the weakening of the rand this week could drive diesel and petrol prices up as the country heads towards the festive season.
“The rand has pulled back on investor concerns that Friday’s weak US labour market data risked the soft landing for the US economy that has been factored into market expectations,” said Investec chief economist Annabel Bishop.
“The rand remains a highly volatile currency, subject to significant fluctuations on changes in global financial market risk sentiment, with further weakness a risk,” she added.
“Fuel costs play a critical role in the lives of most South Africans and we can ill afford any more price hikes in the months to come. A major repercussion of any petrol price hike is that it inevitably drives up inflation,” Neil Roets, the CEO of Debt Rescue, said.
“The accumulated impact of escalating electricity and food prices, consistently high interest rates and the volley of petrol price increases earlier in the year has pushed people to the very edge of a financial precipice,” Roets added.
Roets further added that interest rates in South Africa have held at a 15-year high since May 2023, resulting in hefty additional repayment costs by car owners with vehicle asset finance, which has contributed to the severe financial pressure households are under.
In real terms, this means that those who purchased a car at the beginning of the interest rate hike cycle at 7% (prime rate in September 2021) have been paying on average an additional R834 per month on their car loan at the current 11.75% prime rate (since May 2023) – adding significantly to their financial pressure.
Earlier this month, the AA welcomed the announcement by President Cyril Ramaphosa in his opening address to Parliament of a review of the fuel price formula.
“At the time we noted this validated our years-long call for a fuel price review to mitigate against rising fuel costs which continue to impact on embattled consumers. We also noted the bold step by the president to announce the review should unfold quickly and all role-players in the country’s fuel value chain, including civil society organisations such as the AA, should be part of the discussions,” said the AA.
“Since the announcement by the president, however, there has been no communication from any department on when and how the review will occur. We again call on government not to lose the momentum and initiate the process as soon as possible, specially since fuel costs play a critical role in many sectors of the economy,” the AA further stated.
Roets said he is deeply concerned that consumers are at breaking point under the financial onslaught from South Africa’s two largest energy sources powering the economy, and that authorities are simply ignoring the writing on the wall.
“The reality is that people are unable to sustain themselves and their families due to the high price of petrol to drive their vehicles and electricity to heat food and keep the lights on – and are turning to debt simply to make it through each month.
“My advice to those who find themselves in a debt trap is to seek help through debt review, where a registered debt counsellor can assist you to manage your financial predicament. It is never too early to ask for help,” Roets further said.
BUSINESS REPORT