Poor feel the pinch

An expert has warned the impact of the latest fuel price hike – effective from midnight tomorrow – will be severe and he has urged government to seek solutions.

Government’s announcement of an increase in the fuel price, which comes into effect on Wednesday, will hit the poor the hardest, an economist has cautioned.

The Free Market Foundation director Jason Urbach’s warning follows yesterday’s confirmation by Energy Minister Jeff Radebe that the price for 93 and 95 octane petrol will increase by 26 and 23 cents per litre, respectively, while the price of diesel will increase by up to 26 cents per litre.

Urbach said the impact of the fuel price would be “felt more by the poorest of the poor”.

“This will gobble into people’s disposable income, resulting in less money for savings and investment. The impact on the country’s economy will also be wider, because there will be a decline in employees’ productivity level. It is a vicious cycle.”

While the price of fuel was government-regulated, with the Organisation of Petroleum Exporting Countries managing oil supply to set the price of oil in the world market, it was “no good for SA authorities to blame petroleum companies for the increase”.

“If government is concerned about the impact on consumers, the majority of whom are poor, it should reduce the tax on a litre of petrol,” Urbach said, adding that “poor people are price-sensitive because they are on the low end of the market. They stay far from work because they are removed from urban centres due to the apartheid planning”.

Radebe said the new fuel price would be published tomorrow.

“South Africa’s fuel prices are adjusted on a monthly basis, informed by international and local factors,” he said. “International factors include the fact that South Africa imports both crude oil and finished products at a price set at international level, including importation costs.”

Radebe said the rand-dollar exchange rate, a decrease in the crude oil price, and the decrease in the petroleum products price, were contributory factors.

Meanwhile, the reported bankruptcy of the Road Accident Fund (RAF) was likely to affect the motorists, according to yesterday’s report in the Sunday Times.

In the latest scandal to hit RAF, the fund is reported to be paying R1 666 per month, per chair, in a furniture rental contract.

The rental contract of 300 chairs at R500 000 a month came after a bid was scuppered to push through an even more audacious five-year R60 million furniture rental contract with the same company in March, the newspaper reported.

This means that while motorists will now be paying over R16 per litre of fuel, R1.93 thereof goes toward the RAF in order to fund the above excesses, in an organisation which is nearly R190 billion in the red.