Ricochet News

Fuel price hike dampens impact of the recent rate cut

Apr 3, 2018
Fuel price hike dampens impact of the recent rate cut

Fuel prices increased on Wednesday and motorists now pay 72 cents more for 95 octane and 93 octane went up by 69 cents. This follows the fuel price increase announced by the Energy Department.

Jesse Weinberg, Head of the SME customer segment at FNB Business comments on the impact on SMEs:

Weinberg says the fuel price increase will dampen the impact of the recent interest rate reprieve for small and medium enterprises. He says the substantial increase poses a cashflow test for SMEs as such businesses are predominantly run on very tight budgets.

“While the latest interest rate cut would have provided necessary relief for SMEs that are utilising credit facilities or servicing debt, the impact will most certainly be diluted by the fuel price hike. We also need to consider the fact that SMEs may still face further increases in expenses due to potential upward adjustments in electricity prices.”

“This simply means small businesses will have to keep a firm grip on the management of their finances to get through this period. Those that are in a position to minimise their reliance on debt should do so without delay and in turn prioritise saving for rainy days,” adds Weinberg.

Dawie Maree, Head of Marketing and Information at FNB Agric outlines the impact on Agriculture:

The fuel increase comes at a time when agriculture is heading for the harvesting of summer crops and therefore will increase production costs.

Maree says the immediate impact will be felt most by producers as input and distribution costs will go up. 

“Distribution costs for agricultural produce in South Africa are already high with almost 80% of grain transported by road; therefore the increase will further squeeze producer margins. Eventually the impact of the increase will be inflationary as the costs of the producer will be passed on to the consumer,” explains Maree.

“On the upside, the increase will not have an immediate impact on farmers as it is currently a low consumption month, however input costs over the long run are bound to increase with the higher price of diesel, which in the end will drive the cost of farming up,” concludes Maree.