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Four sectors hardest hit by fuel price hikes

Jun 09 2018 08:15
Tehillah Niselow

Johannesburg- The Automobile Association (AA) has warned of another fuel price hike in July, while motorists are still reeling from the third consecutive increase in June.

The rand breached the 13 mark to the US dollar this week alongside other emerging markets, coming under pressure as investors turn to asset classes, deemed less risky, in the US and other developed countries.

The reasons for the fuel increase in June include a weaker exchange rate and a rising international Brent Crude oil price.

The petrol price increased on Wednesday by 82 cents per litre, diesel was hiked by 87 cents a litre and the cost of paraffin is up by R1.09 a litre.

Fin24 took a look at the four sectors most impacted by the soaring expenses.

Un-electrified households

The majority of South Africans use electricity for heating and cooking, but significant numbers of people still rely on illuminated paraffin as a power source, particularly in the winter months.

According to 2016 figures from Statistics SA, 84.2 percent of the population is connected to electricity while 76.8 percent use it for cooking.

Even people who are connected to the grid sometimes use paraffin as it is a zero rated item for value added tax (VAT) and is cheaper than electricity.

Farmers

Diesel is a one of the big input costs for farmers, especially livestock and poultry farmers who transport feed and animals regularly.

Paul Makube, senior agricultural economist at FNB Agri-Business commented that farmers will come under increased pressure with rising fuel costs, while the harvest season for maize- a staple food item in SA- is underway until August.

Makube added that farmers are price takers and are usually unable to pass on the costs to consumers as the price is set by retailers or producers, further up the value chain.

He does not expect a large spike in food prices for consumers as farmers have seen a bumper crop for key food items this season.

 Food inflation has been slowing since the end of the drought and several items have become cheaper including breads, cereals and fruit.

Public transport users

Bus companies are under pressure with rising fuel costs, after the negotiated settlement which ended a nearly four week strike in the sector giving bus driver salaries salary increases of 9 percent for the first year and 8 percent for the second year.

Fin24 reported earlier this week that Golden Arrow Bus Services announced plans to increase fares in the coming months as petrol prices soar.

Poor households already spend a greater proportion of their income on transport costs as they usually live further from business nodes.

Stats SA said in 2015 that more than two-thirds of households who fall in the lowest income bracket spent more than 20 percent of their monthly household income per capita on public transport.

Motorists

Those who are lucky enough to have a car are experiencing pain at the fuel pump for the third consecutive month.

People who are able to purchase new vehicles with low carbon footprints are better off than those with older cars, especially if they have stop-start technology found in upper end cars which saves fuel in traffic congestion, according to Ofentse Mokwena, a transport economics lecturer at the University of the North West.

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fuel  |  motorists  |  households  |  price hikes  |  energy
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