Yandisa Miso from Pioneer Financial Planning also said consumers would have to re-adjust their lifestyles. Picture: Gallo Images
Bernard Sathekge and Zibusisozethu Sithole
South African motorists are expected to flock to petrol stations today to fill up before the latest increase in the fuel price takes effect at midnight in what looks like the beginning of a medium- to long-term trend of giving up luxuries to afford petrol.
Fuel prices have skyrocketed in the past few months on the back of rising oil prices. Prices of all grades of petrol are going up by 28c a litre tomorrow after rising about 70c at the beginning of March. Fuel prices have risen by more than 25% over the past 12 months.
While some observers have called for some government intervention, economists have warned that South Africans cannot escape high fuel prices and should rather concentrate on readjusting their budgets to make ends meet. Government has expressed concern over the impact of rising fuel prices on households and spoke of possible intervention without firm indications of this happening anytime soon.
Minister of Energy Dipuo Peters said her department was committed to fulfilling its mandate of ensuring that energy (in the case of petrol and diesel) is accessible to consumers at the lowest possible cost, but stressed that it was not within their power to dictate market fuel prices.
In a telephonic interview Muzi Mkhize, the chief director at the Department of Energy, said the intervention plans announced by the minister last month were still in the pipeline. He said the department will consult other stakeholders on the matter, adding that the intervention plans were not something that could be achieved overnight but should not take forever.
FNB wealth economist Sizwe Nxedlana said the petrol price was driven by market factors and he did not see any remedial action. He said fuel prices go up and down as determined by market factors.
“It is something South Africans must take into account and will have to live with.”
Nxedlana said rising fuel prices would hit the poor most. He said food and transport costs were large components in the budget of poor South Africans and the latest increases will put them under severe pressure.
Brait chief economist Collen Garrow said the only way the government could intervene would be through the reduction or scrapping of the fuel levy. Garrow said such fuel price hikes could lead to social unrest.
Economist at the Wits School of Economic and Business Sciences Tshepo Mokoka said households’ purchasing power had already been eroded. “We expect negotiation season for wages to drag for a long time and also intense strikes will go on for long periods. Employers should be prepared with counteroffers and need to take into account the accumulative impact of price increases to workers,” he said.
He reiterated that South Africans, mainly the poor, could not escape high fuel prices. He said the only practical remedy was to improve economic performance, raise earnings and create more jobs.
Warren Ingram, financial planning professional and director of Galileo Capital, said: “The increases in fuel prices will reduce our capacity to spend on other items as households spend a greater percentage of their income on necessities.
“Eventually, families will start compromising on other basics such as insurance, medical aid and retirement savings, which will further erode the culture of savings we are trying to establish in this country.”
Yandisa Miso from Pioneer Financial Planning also said consumers would have to readjust their lifestyles.
“People must think carefully about how this added expense will affect their budgets and take necessary precautions,” said Miso.
“Eating in and cooking your own food is an option South Africans must consider. Don’t cut your medical, vehicle or life insurance unless you cannot afford to buy food. You do not want to be financially crippled by an accident because you cancelled your vehicle insurance.”