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Tough times ahead for SA consumers

| Economic factors

South African consumers, especially those who reside in Gauteng, are in for some tough times ahead.

Government is resolute on its plans to hold on to the electronic tolling system on the province’s freeways, opting to simplify the tariff structure and reduce the monthly cap instead of scrapping the system altogether. 

Motorists using the freeway system can expect to pay 30c per kilometre and have their monthly toll fee cap set at R225 for light motor vehicles. This will be phased in over 18 months as government makes changes to legislation, the e-toll system and administrative processes. 

More pain on the roads is set to follow this week as new fuel prices kick in. All grades of petrol will rise by 47c a litre in Gauteng on Wednesday, bringing the total price to R13.08 for 93 octane petrol. Low sulphur diesel will increase to R11.73 and the higher sulphur variant by R11.63. 

Behind the increase in fuel prices stand international oil prices, which have firmed markedly since March, when a barrel of brent crude oil cost $57.51, according to Bloomberg data. The energy department chose to leave petrol prices unchanged and slightly decrease the price of diesel last month, but the oil price peaked at $68.47 on May 6, the day this came into effect. 

Oil has stayed above the $62 mark as US oil producers shut down rigs and that country offloaded its stockpiles of the commodity. 

American oilfield service firm Baker Hughes estimates the country’s oil producers have shut down more than half of their oil rigs, with the rig count numbering 875 by last Friday. The US Energy Information Administration’s latest data show that its reducing stockpiles are starting to taper off – a break from convention, as it usually adds more each week. 

The energy department said this suggested the US was rebalancing. This holds implications for the global oil supply glut, which worsened after the Organization of the Petroleum Exporting Countries’ (Opec) decision late last year to maintain production at current levels. Opec will meet again on Friday. 

The department of energy will announce fuel increases for other zones on Tuesday, so not only Gauteng residents will have to cough up. 

Municipal customers might have to budget more for electricity increases – budgeting for Eskom’s recently-awarded tariff hike of 12.69% just won’t cut it. 

The power utility has now approached the National Energy Regulator (Nersa) with a “tariff reopener” to recover an extra R52.8 billion in costs it says it incurred running its diesel generators and implementing a power purchase programme. 

It is also seeking to recover the costs of an environmental levy increase Finance Minister Nhlanhla Nene introduced in his February budget. 

The energy regulator has sent the tariff reopener out for public comment, and plans to make a decision on June 29. If it decides to grant it in full, the reopener will add an extra 12.61% to this year’s tariff increase – bringing the total increase to 25.30%. 

This is much higher than the 16% tariff it requested for the five years from March 2013, which Nersa rejected in favour of an 8% increase – contributing to a cash crunch which led to reviews of its credit rating. 

Eskom spokesperson Khulu Phasiwe said: “Nersa has developed a timeline that could accommodate a 1 July 2015 implementation date. In its decision, Nersa will provide details on the implementation date. Nersa will make a decision that will be an add-on to the already approved equivalent of 12.69% increase for municipalities.” 

Reserve Bank governor Lesetja Kganyago is keeping a close eye on the tariff reopener, which he said threatened to push inflation outside the bank’s target band. 

The Reserve Bank’s monetary policy committee decided to keep the repo rate unchanged last month, but warned that inflationary factors including higher electricity tariffs and the rand’s weaker performance against the dollar – which also contributed to the higher fuel price announced by the energy department – may lead to higher rates in future. 

“The deteriorating inflation outlook suggests that this unchanged stance cannot be maintained indefinitely,” said Kganyago.

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