The fuel crisis in South Africa is a growing issue for the economy. The predominant issue is that fuel price in South Africa fluctuates monthly. Local factors such as inflation and tax may increase the fuel price at any given time. The international oil price also affects the entire globe—and South Africa is certainly not excluded.
Price-altering factors include:
- International supply and demand balances
- The rand-dollar exchange rate is also a determining factor in prices
It is estimated that South Africa is yet to see another increase in petrol prices between the month of November and December. The Rand, which has lost considerable ground against the US dollar in the second half of September, has stabilised around the R15.20 mark and has generally offset slight rises in international oil prices. As a result, oil has retreated from the price spike arising from last month’s Saudi oil refinery attacks, giving a more stable picture for the motorist.
Despite this information, it does not change that the South African economy is in a parlous state, with ongoing policy uncertainty and a growing debt burden. The country is not in the right place to properly address its domestic challenges, let alone developments on the international front, and this leaves fuel users increasingly exposed to movements in the rand.
Implications of weakening rand for South Africans
- Interest rates – A weaker rand fuels inflation, which may result in the bank deciding to increase rates on consumers
- Higher food prices – The rand/dollar price has a direct impact on grain prices, which include South Africa’s maize and wheat prices that are linked to the global dollar prices. This will lead to higher pap and bread prices.
- Cellphone, toys and electronics prices – The price of electronic equipment is directly and strongly affected by a weaker rand.