Political shocks will up fuel cost

2017-04-05 06:03
PHOTO: SUPPLIED

PHOTO: SUPPLIED

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ANY further political shocks that weaken the rand will result directly in increased transport costs, as well as higher costs for those who use paraffin for heating, cooking and lighting, the Automobile Association (AA) said yesterday.Fuel prices for April will be lower than in March, even accounting for the 39 cents a litre rise in fuel taxes that takes effect at month-end.

The AA was commenting on unaudited month-end fuel price data released by the Central Energy Fund.

The AA said international petroleum prices continued to ease in March due to higher global oil stocks, while the rand strengthened against the U.S. dollar over the period, “notwithstanding recent events”.

Even with the fuel tax hikes, petrol is expected to drop by about 24c/litre, diesel by nine cents per litre and illuminating paraffin by 10c/litre.

“However, the last day’s developments have shown that uncertainty persists around key political figures in the Ministry of Finance,” it said.

The rand took a beating on Monday and yesterday, after President Jacob Zuma ordered Finance Minister Pravin Gordhan and his delegation to return to South Africa from an international investor roadshow in the UK and U.S.

By 12.50pm yesterday, the rand was trading at R12,91/$ from a low of R13,11, following reports that Zuma was readying to fire Gordhan.

On Monday, the unit lost over three percent, to close at R12,74 in New York from its strongest level in almost two years before news of the recall.

“In our view, the Presidency was ill-advised to call off the Treasury’s international roadshow at such short notice with so little detail given. The resultant sharp weakening of the rand again demonstrates the importance of political and fiscal stability to investors,” the AA said Biznews founder Alec Hogg wrote in a newsletter yesterday that Zuma’s instruction to Gordhan to abort planned presentations to investors in London and New York “surpasses base stupidity”.

Last Saturday, 30c was added to the general fuel levy, bringing it up to R3,15 a litre, and nine cents will be added to the Road Accident Fund levy, bringing it up to R1,63 a litre. — Fin24 and Business Editor.

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