Consumers to feel the heat

CONSUMERS will only feel the real effects of Finance Minister Pravin Gordhan's Budget in about six weeks' time..

They will have to pay more for goods and services when new fuel levies take effect in April.

Gordhan announced that the fuel levy on petrol and diesel would go up by 20 cents from April 4. He also announced that the Road Accident Fund contribution would increase by 8 cents to 88 cents a litre.

At the beginning of this month the price of all grades of petrol increased by 34 cents, pushing the price of 95 Octane to an all-time high of R10,95 a litre.

Frank Blackmore, associate director and economist at accounting firm KPMG, said over the last 12 months the price of petrol had increased by 22%, but the taxes, he added, only increased by 11% while the basic fuel price increased by 32%.

"In February 2011, R4,18 of the R8,99 was made up of taxes and levies and currently that has increased to R4,62. This means that that increase was mainly driven by the basic fuel prices. Now what is happening is that government is increasing the R4,62 by 28 cents," Blackmore said.

He said the current increase in fuel levies and taxes was just 6% within current inflation.

"The minister announced reducing the cost of doing business in South Africa. Obviously this is going to add to the cost of doing business in South Africa. An additional 20 (+8) cents a litre touches everybody.

"Whether you are poor or rich it does not matter, everybody pays tax. Even people using public transport such as taxis and buses, that will be incorporated into the fares.

"The worst is that the increase feeds into inflation and inflation erodes the wealth of every South African. One rand today is worth less next year," Blackmore said.

He said the price to be paid by motorists in April would depend on the exchange rate at the end of the third week of the month and the fuel price at the end of the month.

"What we know for sure is that it will cost 28 cents more," he said.

"What has badly affected the pump price over the last 12 moths was that the fuel price has increased while the country's exchange rate did not have a strong increase against the dollar.

"As soon as they resolve the problems in Europe we will see growth in the US, people will buy oil and that will push the price up and therefore the petrol price will also go up.

"This will be worse if the exchange rate depreciates."