Fuel price increase: A bleak festive season for road freight companies

As of Wednesday, the cost of diesel for transporters will increase by R1.42 for 500ppm and R1.43 for 50ppm. That will raise the prices to R25.49 and R35.75 per litre respectively.

The price of both grades of petrol, 93 and 95, will increase by 51 cents per litre.

Consumers as well as road freight transporters will feel the pinch as the year draws to a close, with prices of goods set to increase even further.

Increasing costs

Diesel cost R12.15 and R21.78 in January 2022, and has doubled since December 2021.

The Central Energy Fund attributed the price hikes to rising international fuel prices and the weakened rand.

According to the Road Freight Association (FRA), road freight transporters, who use diesel as the energy source for their vehicles, have had to increase their pricing to cover the ever-increasing fuel costs.

Prospective increases will be driven by transporters needing to fund operations, whilst only being paid months after the work has been done – in some cases up to three months afterwards.

ALSO READ: SA facing record diesel price as fuel prices increase on Wednesday

“In the meantime, the next load needs to be moved, and so on, and that all needs fuel for the vehicles. There just aren’t limitless reserves of cash to continue the high level of fuel expenditure against the delayed payment for work already done,” the association lamented.

Less stock moved

The association explained that in some cases, customers and/or businesses will reduce volumes to be transported, or even curtail stock movement, depending on consumer consumption levels.

Transporters will feel this impact on their businesses, it warned.

Many transporters will not be able to muster the guarantees required for purchasing fuel on credit, with them having paid for fuel, the driver, covered other costs while operating a business.

Others simply do not have any cash to carry themselves for 90 days.

“Whether we like it – or not – the continuous increases in the price of diesel inevitably drives the cost of transport and logistics up – step by step – and, with roughly 85% of all goods moved through and around the country having a road leg at some part in the journey, there will be increases to consumers as the cost to transport goods increases,” the RFA explained.

NOW READ: LISTEN: ‘High diesel prices will hurt businesses’ – Road Freight Association

Fuel breaches 55% mark in daily operational costs

Fuel breached the 55% mark in daily operating costs during the third quarter of the year, and as the country heads into the final month of 2022, it is already hovering around 60%.

“That cost will in most cases be borne by the consumer. You and I will pay more for, well, everything. From food to fuel, from clothing to electronic goods and everything in between.

“Prices will rise – some immediately, but more so a domino effect will ensue, the next in a long line of such domino effects that we have seen too often in the last few months,” the RFA said.

Transport costs will also rise. Those that cannot afford to carry loads at the current rates or prices customers are prepared to pay will have to close down.

Business closures and unemployment looms

More business closures means more unemployment, less business and revenue driven through the transport sub-sectors, and of course, higher prices at the till.

“As we have experienced, the Reserve Bank has aggressively increased the Repo Rate in an attempt to restrict the inflation monster, and signs are pointing to another stiff repo rate increase in November (at least 50 basis points – if not another 75 basis points).

“That, together with transportation costs for goods and services, will grip the consumer in a tightest financial squeeze just before the festive season – where traditionally many retailers have generated income to carry them through the financial year.”

Compiled by Devina Haripersad.