Transporters are implementing multiple measures to reduce the impact of rising fuel prices but will soon be forced to pass on the higher cost of doing business to customers, leading to retailers’ hiking the prices of basic goods from groceries to clothing.
Road Freight Association CEO, Gavin Kelly, raised this concern after the latest fuel price hike took effect on Wednesday, 6 March, saying that while diesel prices had not yet hit the all-time high of R25,74 per litre, any gains from the price decreases seen in 2023 were being eroded. The price of diesel increased R1,05 for 500ppm and R1,18 for 50ppm, while the price of petrol (93 and 95 octane) rose by R1,21 per litre.
“We have all become used to the age-old song by The Central Energy Fund (CEF) that this is due to the dollar price of oil on the world market, the value of the rand versus the dollar and the internal ‘under or over recovery’ within the country itself,” Kelly said.
“While South Africa cannot control the demand, and therefore the dollar price per barrel that we must pay, we could control the value of the rand versus the dollar, allegedly something to do with the way the country is seen across the world.”
Kelly noted that fuel prices were starting to remain around the R20 mark “more than we would like but this does mean that over an extended period the cost of transportation has remined higher than expected, and that will have an effect on many transporters who have contracts over a couple of years that factor in a fixed price to cover the ups and the downs”.
“Any gains achieved during 2023 are steadily being eroded and road freight companies will now be faced with the reality of having to increase pricing to cover the ever-increasing cost of diesel,” he said.
Kelly said transporters faced the challenge of having to fund operations while customers delayed payment for services for as long as three months.
“In the meantime, the business needs to keep operating, which requires fuel, and many transporters don’t have limitless reserves of cash to continue paying for fuel against the delayed payment for work already done,” Kelly said.
“As the cost of transport increases, and the decreasing levels of disposable income of the consumer begin to factor into retail and other sales, businesses will reduce volumes to be transported or even curtail stock movement.”
He said this would impact transporters who would not be able to muster guarantees to buy fuel, which comprises more than 50% of operating costs, on credit.
“In the short term, general transport costs will rise from food to fuel, from clothing to electronic goods and everything in between. There will be the inevitable price escalations – 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.”
He said transporters were trying to minimise the consumption of fuel by employing strategies, including using new fuel-efficient vehicles; taking routes with less traffic; improving loading schedules to reduce the re-running of portions of routes; ensuring tyre and suspension maintenance and correct deliveries to reduce mistakes that required a duplication of trips.
“Unfortunately, the reality is that transportation costs are an input cost for most consumer products and will, eventually, filter down to the consumer,” Kelly said.
