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Rand eating away at April's expected petrol price drop - AA

Mar 28 2017 13:16

Cape Town - Fuel prices for April will be lower than in March, even accounting for the 39 cents a litre rise in fuel taxes which takes effect at month-end.

This is according to the Automobile Association (AA), which was commenting on unaudited month-end fuel price data released by the Central Energy Fund.

According to the AA, international petroleum prices continued to ease during March on the back of increased global oil stocks, while the rand performed strongly against the US dollar over the same period, "notwithstanding recent events".

The AA said even with the fuel tax hikes, petrol is expected to drop by about 24c/litre, diesel by 9c/litre, and illuminating paraffin by 10c/litre.

"However, the last day's developments have shown that uncertainty persists around key political figures in the Ministry of Finance."

The rand took a beating on Monday and early on Tuesday, after President Jacob Zuma ordered Finance Minister Pravin Gordhan and his delegation to return to South Africa immediately from an international investor roadshow in the UK and US.

READ: Rand now at R12.70/$ on Gordhan saga

By 12:50 on Tuesday, the rand was trading at R12.91/$ from a session low of R13.11 following reports that  Zuma was readying to fire Gordhan. On Monday the unit lost over 3% to close at R12.74 in New York from its strongest level in almost two years before news of the recall.

"In our view, the Presidency was ill advised to call off the Treasury's international roadshow at such short notice with so little detail given. The resultant sharp weakening of the rand again demonstrates the importance of political and fiscal stability to investors," the AA said.

The AA said any further political shocks which weakened the rand would result directly in increased transport costs, as well as higher domestic costs for those who use paraffin for heating, cooking and lighting.

READ: Zuma batters SA's credibility by ordering Gordhan home

Biznews founder Alec Hogg wrote in his morning newsletter on Tuesday that Zuma’s instruction to Gordhan tor abort planned presentations to investors in London and New York "surpasses base stupidity".

"Pravin Gordhan has worked tirelessly to court the foreign capital every developing country must attract to grow. These roadshows are critical to maintaining SA’s investment grade rating – without which its cost of borrowing will increase, punishing, especially, the poor.

READ: Gordhan crackdown: Chaos, confusion and Cyril

"Being ordered to return home on an apparent whim from Pretoria not only humiliates Gordhan – it needlessly irritates those whose cash injections can make the difference between a flourishing or floundering economy. It is no coincidence the Guptas are publicly demanding Gordhan appear in court tomorrow to defend himself against their absurd assertions," he wrote.

The AA said lower-income citizens are disproportionately affected by fuel price hikes arising from rand weakness. The government's lack of sensitivity towards investor risk appetite is directly contributing to increased hardship for the poor,"  it concluded.

On April 1 an additional 30c will be added to the general fuel levy, bringing it up to R3.15 a litre, and an additional 9c will be added to the Road Accident Fund levy, bringing it up to R1.63 a litre.

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aa  |  sa economy  |  fuel levy  |  petrol prices  |  fuel


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