The conflict in the Middle East is having a direct impact on global oil markets, which in turn is significantly increasing fuel prices around the globe including in South Africa and in Nelson Mandela Bay.
The Nelson Mandela Bay Business Chamber has noted that some local fuel suppliers are implementing fuel surcharges as a direct response to the on-going conflict, and its resultant volatility on the global oil markets which in turn is impacting upon local fuel cost and availability. Further exacerbating this challenge is the pending increase in fuel and road accident fund levies, as outlined in February’s Budget Speech, effective from 01 April.
A snapshot survey conducted by the Chamber among its membership has revealed that 25% of businesses which responded do not have immediate access to fuel, while 26% have indicated that they have been rationed. These businesses are expecting increases in operational and input costs, which are likely to reduce profit margins as they absorb the cost, and which may later cause inflation levels to increase.
Higher fuel pricing comes at a time when our local economy is facing immense pressure and the metro is grappling with an unacceptably high official unemployment rate of 28.2%. Our automotive manufacturing industry which serves as the anchor to our economy, faces growing threats of deindustrialisation; the agriculture sector faces increasing uncertainty in terms of export markets; and our tourism value proposition has continued its decline.
The fuel price has a direct bearing on all sectors of our economy and as it increases, so too does the cost of transporting goods to export and domestic markets, which in turn results in the prices of consumables, intermediate goods and finished products increasing. This will further increase the cost base for local businesses from small through to large businesses, who may need to reduce expenses, restructure their operations or even close. Alongside this, workers and commuters will face rising costs to travel to work and other locations, while tourists may limit or cancel their travel due to the rising transportation and other costs.
A further concern compounding the issue is the reliability and security of fuel supply. South Africa is highly reliant on refined petro-chemicals such as diesel, petrol and paraffin, and over the past few years it has reduced the number of its fuel refineries, further increasing reliance on imported fuel supplies. Our survey further revealed that 32% of businesses are directly aware of specific fuel and service stations which are experiencing shortages of petrol and diesel.
It is vital that the country has mitigation measures in place to ensure that alternative fuel sources are secured, so that there are no disruptions to supply and that fuel price increases are contained as far as possible. Furthermore, it is critical that urgent measures are implemented to prevent price gouging, panic-buying and stockpiling by opportunistic sellers.
Alongside this, South Africa’s contingency plans which are geared at ensuring ongoing fuel security needs to be transparently shared, in order to provide assurances that the necessary mitigation actions are being taken.
In the short-term there must be transparency around fuel prices, while consideration should be given to providing temporary relief to consumers through the reduction in fuel levies, and at the same time temporarily increasing the extent to which the fuel levies can be reclaimed via the rebate system. To prevent unnecessary hoarding of supplies, and as an emergency temporary measure, more frequent weekly adjustments to regulated fuel pricing should be introduced.
Other actions which should be considered include the publishing of safe fuel storage guidelines; the sharing of real‑time, hyperlocal information such as fuel availability, service station, and depot queues through public platforms; and managing fuel demand as much as possible by for example encouraging people to purchase local products rather than imported products.
Denise is the Chief Executive Officer of the Nelson Mandela Bay Business Chamber
