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Weak rand to push up fuel prices - AA

Oct 27 2017 16:19
Lameez Omarjee

Johannesburg – The rand has dropped considerably over the past month which will make fuel more expensive in November, the Automobile Association (AA) has warned.

And this does not yet factor in the rand's fall in the wake of Finance Minister Malusi Gigaba's mini budget address. 

On Friday in a statement the AA said that, with the rand having slipped around 22 cents to the dollar, fuel prices would rise next month. 

The AA expects petrol to only rise by 4 cents per litre, and diesel by 26c/l. Illuminating paraffin, meanwhile, is expected to rise 18c/l. 

The association however warned that the full impact of the rand weakening in the wake of the finance minister's address in Cape Town on Wednesday had not yet been factored into fuel prices.

READ: Rand hits 11-month low as rating downgrade fears intensify

"We expect that impact to immediately start feeding into the next month's fuel price calculations, meaning South Africans should prepare for further fuel price hikes before Christmas," said the AA.

The rand hit an 11-month low following Gigaba’s maiden budget speech to trade at R14.10 to the US dollar on Wednesday. Shortly before Gigaba began his address, it was trading at R13.74 to the dollar

On Thursday it traded as low as R14.26/$, and opened at R14.24/$ on Friday.

At 15:00 on Friday it was trading at R14.17 to the greenback - some 43 cents lower than before the speech began. 

In a report on the rand issued on Thursday by Investec, Chief Economist Annabel Bishop said that further rand weakness was expected for the quarter, with the rand possibly falling to R14.40/$.

For the first quarter of 2018, the rand could move to R15.06/$ if a “compromised candidate” emerges as a leader of the ANC following the elective conference in December.

But in the absence of further credit rating downgrades, and in a strong global growth environment, the rand could move back to R14.10/$, said Bishop.

But the build up of government debt does not make this a certainty, she said.

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