Petrol price increase will hurt

2018-04-05 06:04

Economists have warned that the petrol price increase would dampen the impact of the recent interest rate cut on small and medium enterprises.

The Department of Energy said the adjustments would result in an increase of 72c/litre for 95 unleaded petrol and 69c/litre for 93 unleaded.

Users of all diesel grades would pay 65c more, while illuminating paraffin would go up by 2c/litre, the department said.

According to Jesse Weinberg, head of SME at FNB Business, the “substantial increase” would present a major cash flow challenge for small business owners, and dampen the effects of the recent repo rate cut by 25 basis points, from 6.75 % to 6.5 %.

“While the latest interest rate cut would have provided necessary relief for SMEs that are utilising credit facilities or servicing debt, the impact will most certainly be diluted by the fuel price hike,” said Weinberg.

“This simply means small businesses will have to keep a firm grip on the management of their finances to get through this period,” said added.

The VAT increase by 1 percentage point to 15% is also expected to put pressure on the small businesses and consumers. The increase is the first since 1994.

Government has also imposed higher levies for the fuel levy and the Road Accident Fund, which went up by a combined 52c from April 4, as stipulated in the February budget speech.

Meanwhile a proposed fuel levy for motorists in the Western Cape, in addition to the existing national fuel levy, is being fiercely opposed. The comes as the provincial government said it is in urgent need of funding to maintain and build roads.

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