Interest rates on hold but petrol to go up

While the South African Reserve Bank kept interest rates on hold last week, consumers will suffer another blow as petrol prices are set to rise this week.

The Department of Mineral Resources and Energy (DMRE) announced the fuel price adjustments on Thursday.

Diesel users, however, will gain some reprieve after the DMRE said prices would be coming down.

For petrol, the 93 ULP and LRP grades will increase by 65 cents per litre, while the 95 ULP and LRP grades will increase by 67 cents per litre.

Diesel 0.05% sulphur will also see an increase of R3.22 cents per litre, while the grade of diesel 0.005% will decrease by R1.78 cents per litre.

Illuminating paraffin will also decrease, by 29 cents per litre.

The DMRE further announced that SMNRP for IP would decrease by 58 cents per litre and the maximum price for LP gas would decrease by 19 cents per kg.

The price adjustments will come into effect on Wednesday.

The AA, before the official adjustment announcement, said the diesel price decrease was welcome news for the economy.

“Diesel is a big input cost in major sectors such as agriculture, mining, manufacturing and retailing, and an increase here often contributes to increased prices of basic commodities,” the AA said.

South Africa’s fuel prices are adjusted monthly, informed by international and local factors.

International factors include the fact that South Africa imports crude oil and finished products at a price set at the international level, including importation costs such as shipping costs.

On oil prices, the DMRE said: “The average Brent Crude oil price increased from $82.50 (R1 535) to $84.22 per barrel, during the period under review.

There was a lot of volatility in the market this period. The main contributing factors is the continued OPEC+ production cuts and the attacks on the Russian refineries by Ukraine, which could pose a supply risk.”

The local currency, the rand, appreciated, on average, against the US Dollar (from R19.20 to R18.04 per dollar) during the period under review when compared to the previous one.

“This led to lower contributions to the Basic Fuel Prices of all products by over 10.00 cents per litre,” the DMRE said.

Annabel Bishop, Investec’s chief economist, said in a note: “Energy prices have picked up year to date, supported by Opec+ quota tightening, but other commodities prices are mixed, leading to uninspiring support for commodity currencies, although some strength in these exchange rates in the second half of the year is likely.”

She said the economic outlook for South Africa looked slightly brighter.

“Constraints remain at the ports, rail networks and power production are expected to be worked down over the next few years, increasing SA’s export capacity as commodity prices strengthen longer-term, supporting the rand,” Bishop said.

With more than half (55%) of the country’s citizens able to cover costs for only food, shelter and the basics, this begs the question: Will South Africans be able to hang on and hang in until the government finally decides to cut the repo rate?

Neil Roets, the CEO of Debt Rescue, said that aside from the relentless cost-of-living increases, the pressure on the disposable income of working South Africans was the biggest red flag as take-home pay failed to keep up with inflation.

“The only way to turn this around is to lower inflation which, in turn, will lower interest rates. Surely the plight of the country’s workers and their families should be foremost when making decisions,” he said.

Cape Times