From the 1st April which is just over a week away fuel prices are about to increase by 25% for petrol and a shocking eye watering 50% for diesel. This is the perfect time for the government to blame the Middle East conflict whilst hiding their new increased fuel levies. The cost of living will be directly impacted and I am sure not just South Africa, but all of us wherever we live will see inflated prices across the board shortly.
A barrel of oil has risen from $60 at the start of the year to a current price of $107 and is expected to continue to rise until the conflict is over. The problem is this is expected to not be a quick war and one can expect many more months of financial pain.
The problem with South Africa is that with only 2 refineries the country imports the bulk of it's fuel needs as the finished product. One of the 2 refineries is non operational due to maintenance so SA is down to only one.
In South Africa all imports via the ports are then trucked by road due to the railways not being used. Logistics companies were forced to move to trucks due to the lack of maintenance on the railways along with cable and track theft. SA is like a proper movie and is an ongoing crime scene which should be a text book example of how a country should not be run.
With that in mind every item in the retail stores whether imported or produced locally is trucked via road. The 50% extra costs for diesel is going to have a major knock on effect foe every single person in SA. The poor will be hit the hardest and the increases in living costs will be significant.
What will be interesting and scary to see is how much the basics like milk and bread will rise as I suspect a good 20-25% increase. Like always once the new price mark has been met then this becomes the benchmark price and it will never come down again even if diesel prices drop in the future.
Manufacturers and retailers will see this as another golden opportunity to increase their profit margins which they will blame on the fuel prices. A 20-25% increase would impact any consumer knowing that salary increases are in single digits at best if you are lucky enough to get an increase at all. Most businesses have been cutting back on staff and just having employment is rare in SA today. I heard on the radio yesterday that 1 in every 10 people pays taxes so it shows how fragile the economy is.
The rise in fuel prices at these rates is unsustainable for the masses knowing they are reliant on taxis to get to work. The wages that the few that do work will be worth far less next month making life that much tougher. Paraffin is what many use to cook with and that is also doubling in price. I mentioned plastic packaging in a post recently expected to rise by 20-30% and now with trucking via deliveries this could go much higher.
If SA had a functioning rail network then the fuel prices would not be that impactful yet this is not the case. Trucking in SA is a very big employer with over 600 000 trucks on the roads and some even suggest why the government is reluctant to fix the railways. It is not surprising to see why SA roads have deteriorated either as all these containers should be transported by rail.
Many are in for a shock next month and even my household who is not struggling financially will be bracing itself. Getting used to the new cost of living is never pleasant and this will be a very tough one to get the head around.