Fuel crisis deepens as experts warn South Africans could face even bigger price shocks

South Africans are already feeling the sting at the pumps, but economists and consumer groups are warning that the country’s fuel crisis could have much bigger consequences if government does not intervene.

With fuel prices having climbed sharply in recent months, pressure is mounting on government to reconsider the taxes and levies included in the price motorists pay.

Consumer groups warn that another major increase would not only affect motorists. It could push up transport, food and business costs across the economy at a time when household budgets are already under pressure.

AfriForum calls for fuel price audit

AfriForum spokesperson Ernst van Zyl accused government of appearing paralysed in the face of the energy crisis.

The organisation has now instructed its research department to conduct its own investigation into how South Africa’s fuel prices are calculated.

The investigation will examine several components of the pump price, including the general fuel levy, carbon fuel levy and Road Accident Fund levy.

AfriForum also wants to examine how these funds are used, how transparent the system is and whether the various charges remain proportionate to the financial pressure being placed on consumers.

Van Zyl said the organisation previously asked Finance Minister Enoch Godongwana to commission an independent audit of fuel prices and levies, but had not received an indication that government intended to do so.

The organisation has also previously called for a temporary reduction in the general fuel levy to be made permanent, or at least extended.

Fuel costs are spreading through the economy

The concern goes beyond the amount motorists are paying every time they fill up.

Fuel is a major input cost for transport companies, farmers, manufacturers and businesses moving goods around the country. When diesel and petrol become more expensive, those costs can eventually filter through to consumers.

Van Zyl warned that the increase in transport costs could have a significant inflationary effect, putting additional pressure on businesses, agriculture and households.

The Automobile Association of South Africa (AA) has also criticised government’s response.

AA CEO Bobby Ramagwede said the organisation had warned government earlier in the year that major increases were coming if action was not taken.

According to Ramagwede, the issue should not be viewed simply as a once-off increase at the fuel station.

He pointed out that motorists were paying around R19 a litre in January, meaning the increase represents roughly a 30% jump in less than a year.

For someone filling up every week, that difference quickly adds up.

Economist warns South Africa is running out of room

Economist Dawie Roodt said the bigger problem is not simply the fuel price increase itself, but the state of the economy when consumers are forced to absorb it.

He argued that South Africans are increasingly unable to cope with additional financial shocks because economic growth remains weak.

“If we were in a position where the economy was growing at 4% or 5% and took hits like this, we could take it in our stride,” Roodt said.

Instead, he expects the fuel shock to contribute to broader economic pressure.

Roodt warned that inflation could rise above 5%, while economic growth could remain around 0.7% for the year.

With the population growing faster than the economy, he described the situation as another potentially lost year for South Africa.

Interest rates could become another problem

One of the biggest concerns is what happens if higher fuel costs feed into prices across the economy.

If inflation rises significantly, the South African Reserve Bank could face pressure to raise interest rates to reduce demand and prevent prices from accelerating further.

That would create another headache for households already struggling with fuel, food and other living costs.

Higher interest rates mean more expensive borrowing, which can affect everything from home loans and vehicle finance to credit repayments.

Roodt said the Reserve Bank could ultimately have little choice but to tighten monetary policy if inflation becomes entrenched.

“Raising the interest rates is bad for everyone, but it is the only solution we have right now,” he said.

The real cost may be bigger than the petrol price

For motorists, the immediate concern is what appears on the fuel station board.

But the bigger economic question is how long South African households and businesses can continue absorbing higher transport and energy costs.

If fuel prices remain elevated, the impact could extend well beyond the petrol station, affecting the cost of moving goods, farming, running businesses and ultimately buying everyday essentials.

With government facing renewed calls to review fuel levies and provide relief, consumers will be watching closely to see whether authorities step in or allow the latest fuel shock to work its way through the economy.

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Source: The Citizen