The increase in fuel prices which comes into effect on Wednesday once again shines the spotlight on the extent to which South African consumers are at the mercy of matters over which they have no control, like the value of the rand and the price of oil.
Sustained economic growth is the only thing that will turn the long-term trend of increasing fuel prices around.
The price of oil depends on external factors. The value of the rand, on the other hand, is mainly influenced by foreign currency dealers’ perception of the country’s economy.
The price of oil is determined in American dollars, but it is bought with rands. So, the less the rand is worth, the more expensive fuel becomes in South Africa.
The value of the rand will only recover on a sustained basis once confidence in South Africa’s economic and political stability is restored. It will result in cheaper fuel, lower inflation and, consequently, stronger economic growth.
Last week, the South African Reserve Bank put forward a number of recommendations to curb sky-rocketing fuel prices. They deal primarily with the assumptions according to which profit margins and the basic price of refined fuel types are determined.
Although pricing should constantly be reviewed, the difference it makes is entirely overshadowed by fluctuations in the exchange rate and the price of Brent crude oil.
Ultimately, the fuel price – just like the rest of the South African economy – deserves better than the ANC government.
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