Fuel prices crippling SADC

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By Magreth Nunuhe & Colleta Dewa  

Experts have warned that the recent fuel price increases in Namibia and South Africa, combined with a weakening rand against the US dollar, could have adverse economic effects not only on the two countries but also on the region and emerging markets globally.

In Namibia, the Ministry of Mines and Energy increased fuel pump prices by 10 cents per litre that took effect Wednesday. This came after the ministry increased fuel prices by 60c last month. 

A litre of 95 Octane Unleaded petrol now costs R12.72, while diesel 500ppm is now R13.11 per litre in places like Windhoek.

A massive petrol price increase that came into effect Wednesday night also hit South Africans. That country’s minister of energy, Jeff Radebe, announced the price increase on Sunday. Radebe said the petrol price would rise by 26c, taking the prices to a record R16/litre for petrol.

Petrol was already at an all-time high after June's increase of 82c a litre and the recent price increase is expected to hit already reeling consumers hard.

Klaus Schade, an economic analyst and director of the Economic Association of Namibia, said the recent fuel increase in Namibia means that transport businesses would incur higher costs, which would spill over to production costs in sectors such as manufacturing and agriculture, as well as the export of goods, resulting in price adjustments.

Private vehicle owners will also feel the pinch, as they would have less disposable income due to the increase in fuel prices.

The transport sector has lamented the monthly increase in fuel prices. Mary Phadi from the Truckers Association of South Africa said the fuel price increases have hugely affected workers in the industry. Workers in the sector are losing jobs because employers are struggling to keep up with runaway fuel prices.

"Before we even talk about this week's fuel increase, everybody who has got a truck in South Africa is in trouble. It is really a concern to us because the economy is not growing and we don't get to have more work opportunities. If you add the fuel price increase for this week to what is already a challenging environment, then you can see we are feeling the pinch. We feel that the government is failing us, as emerging truckers," said Phadi.

Phadi added that the transport sector was even more affected because the government does not provide financial support to the transporters, as it does other sectors. She said the government has been supporting farmers and manufacturers.

“As truckers, we feel that the government has neglected us. We are engaging them at the moment, and diesel is one of the issues. We are engaging them intensively regarding the scale that is not favouring the black truckers in South Africa,” she said.

South African truckers were hopeful that the new regime led by President Cyril Ramaphosa would be able to address their plight but they find themselves going down.

The Truckers Association of South Africa boasts a membership of more than 500 members.

Uber, one of the critical players in the country’s transportation industry, said the fuel increase is a major hitch to business. Uber spokesperson Samantha Allenberg said the organisation has been hugely affected by the instability in the prices fuel.

"The recent increases across the various industries are felt by all citizens of South Africa. Prior to the recent fuel price increases, we launched a temporary winter incentive as well as hourly guarantees to help reduce this financial impact. We constantly monitor partner economies and examine consumer price sensitivities to ensure fares are correctly priced so that riders continue to take trips and drivers have access to more fare-paying passengers,” said Allenberg.

South Africa’s minister of Economic Development, Ebrahim Patel, said the government’s hands are tied and there is nothing much it can do to stem the rampant fuel increases since it imports the bulk of its requirements.

 Responding to a written question from the EFF in Parliament on Tuesday, Patel said there was little the government could do to control fuel inflation.

"The change in the price of petrol is typically a function of both changes in international exchange rates, particularly the US dollar-rand exchange rate, and the change in international product prices, particularly crude oil," said Patel.

Responding to the issue of fuel levies Patel said the revenue collected was used to improve transport infrastructure.

"This investment in transport infrastructure reduces transport costs in the economy, which in turn enables more economic participation by businesses as well as households and, in turn, can moderate overall inflation," added Patel.

The ruling party, ANC, has reportedly called on the government to freeze or lower fuel price, as it puts pressure on South African livelihoods.  The ruling party lamented that the impact of fuel increases directly hits the lives of poor South Africans as “the monopolistic food outlets pass the transport costs to them”.

Namibian mines and energy minister, Tom Alweendo, explained that the reason for the increase in fuel price was due to oil companies being paid more for importing fuel into the country than they were being compensated for at the pump, which led to significant shortfalls, warranting an increase of fuel pump prices.

“Times are tough and mindful of the fact that oil price is the cornerstone of the global economy in that it is not just a cost at the pump to motorists, but also a cost factor in the price of numerous other commodities, from the food on our tables to flight tickets,” said Alweendo.

To make matters worse, the exchange rate between the Namibian Dollar and the US dollar has not been favourable in June either, as a major depreciation of R12.52 in May to R13.10 to the US dollar was recorded.

The Namibian Dollar is pegged one-on-one with the South African rand. Refined oil prices hovered above US$85 per barrel with net importers of oil feeling the pinch of the high prices.

But Schade says he does not expect oil price levels to go up over the next few months as fresh sanctions the US meted against Iran could affect oil production in that country.

He said Venezuela, another oil-producing country, was also facing problems with oil production and constraints in oil supply.

“In SADC, all countries importing oil will be affected by oil prices,” he said.

The Namibia Bus and Taxi Association’s acting president Jeffrey Platt said there would, however, be no immediate increase in bus or taxi fares, as the association was organising a conference with operators and owners countrywide.

“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 last increased fares.

Meanwhile, Platt has cautioned transport operators in Namibia 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.

 

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