Significant Fuel Price Hikes Strike South Africa's Economy

The Department of Mineral Resources and Energy has rolled out heavy price hikes for petrol, diesel, and illuminating paraffin due to increased international product rates and the depreciation of the Rand against the American dollar. The announcement states that starting Wednesday, the price of Petrol 93 will increase by R1.08/litre, Petrol 95 by R1.14/litre, Diesel 0.05% Sulphur by R1.97/litre, Diesel 0.005% Sulphur by R1.94/litre and illuminating paraffin by R1.51. Also, LPGas will cost an extra R2.50 per kilogram.

The price increases for these fuels have been influenced by the average exchange rate between the South African Rand and US dollar, depreciating to 18.9853 from 1 September 2023 to 28 September 2023 from 18.6731 during the previous period. This depreciation has resulted in uplifting the basic fuel prices of petrol, diesel and illuminating paraffin.

Economists, including Dawie Roodt and Koketso Mano, warn these rising fuel prices could drive inflation, affecting South Africa's economic sectors heavily. The fuel price increases are a potential risk, as it escalates transport costs, the matrix of product production and could instigate wage inflation.

Ismail Zaakirah and Christopher Wood, economists at South African Reserve Bank (SARB), said that even a 10c per liter fuel price hike could cost the economy over R1 billion per year. They caution that fuel price spikes could engender persistent inflation with consequential impacts on wage and price increases.