Fuel costs driving inflation

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By Magreth Nunuhe

Windhoek – Namibian economic analyst, Klaus Schade, has warned that a significant increase in the price of fuel would have a strong impact on inflation and could push up the rate by 1.5 percentage points to the annual inflation rate for July - pushing it over the 5% mark.

“The accumulated fuel price hikes over the past 12 months will result in double-digit year-on-year inflation rates for the category 'transport',” he said.

However, he said he did not expect the rise in inflation to have an effect on the repo rate as long as inflation is within the 3-6% threshold.

The June 2018 annual inflation rate stood at 4% and 0.2% on a monthly basis, according to the Namibia Statistics Agency (NSA).

Inflation is calculated based on a basket of goods and services, containing a representative sample of the goods and or services commonly consumed in a country, and weighted in accordance with the relative percentage of expenditure allotted to each of the said goods at the household level.

Namibian inflation is largely determined by three categories of the overall Namibia Consumer Price Index (NCPI) basket, namely: (i) housing, water, electricity, gas and other fuels, (ii) food and non-alcoholic beverages and (iii) transport, which cumulatively make up just under 60% of the total inflation basket.

The fuel increases mean that transport businesses would incur higher costs, which would spill over to production costs in other sectors such as manufacturing and agriculture, as well as the export of goods, resulting in price adjustments.

The pinch will also be felt by private vehicle owners as they would have less disposable income due to the increase in fuel prices.

Namibia and South Africa have seen striking fuel pump price hikes, combined with a weakening rand against the US Dollar, which could have adverse economic effects for the region.

Refined oil prices hovered above US$85 per barrel with net importers of oil feeling the pinch of the high prices.

The basic fuel price for import (shipping and handling) at Walvis Bay costs 75 cents per litre of 95 Octane Unleaded petrol and 78 cents for a litre of diesel 500ppm.

From the R12.72 per litre for 95 Octane Unleaded petrol and R13.11 per litre for diesel 500ppm, the dealers take a levy of R1 per every litre of petrol and diesel; the Motor Vehicle Accident Fund receives 50 cents per litre, while the Road Fund Administration gets R1.30.

The Ministry of Finance receives 40 cents of every litre, while the Natural Energy Fund gets a levy of 98 cents for petrol and R1.02 for every litre of diesel.

Oil companies receive 91 cents for every litre of petrol and diesel.

Other entities that also get levies from petrol and diesel are customs and excise (4 cents), coastal storage (2.21 cents), coastal stock financing (2.95 cents).

 

Taxi fare increase

Already, there are suspicions that the taxi industry may raise fares from R10 to R15 per trip.

The Namibia Transport and Taxi Union’s president, Werner Januarie threatened to implement the 50% hike on 1 September 2018 with or without approval from the government.

The last taxi fare increase was in 2016 from R9 to R10 per trip.

But the Namibia Bus and Taxi Association’s (NABTA) acting president Jeffrey Platt quashed such fears stating that there was no such thing as the increment would be within the 10% limit as stipulated by the Ministry of Works and Transport.

“That (50% price hike) will not happen. Not even the Ministry (of Works and Transport) would allow that. It’s ridiculous to think of a 50%,” he said

Platt said that they were currently negotiating with the government and have written letters to the line ministries about a fare increase.

They were also busy planning a meeting with the regions so that they could come up with a price list for the whole country.

“We want everyone to bring their part. We know that drivers and owners of transport services are suffering because of the fuel hike,” he said, adding that tariff increases were imminent as it has been more than three years since the association had increased fares.

Platt cautioned transport operators not to increase fares as that would be deemed illegal.

“We have to give notice to the Ministry of Mines and the Ministry of Works (and Transport) for the increment. Just be patient – we are busy, it is an emergency,” he said.

South Africa increased its fuel pump prices by 26 cents, to R16 per litre for petrol.

The main reasons given for the fuel price adjustments in South Africa were also the depreciation of the Rand against the US Dollar; decrease in the price of crude oil and a decrease in the import price of petroleum products.

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