Mzansi’s department of energy announced rare good news for transporters. Until further notice, the cost of diesel will cost motorists between R24.23 and R23.92 a litre, depending on where you are in the country.
Thanks to an appreciating rand against the US dollar, the pump price for diesel dropped to R24.23 and R23.92 respectively.
According to the Road Freight Association, this is a good sign that transport costs are becoming less expensive from the incredible highs seen throughout the year.
“But fuel prices are still 33.4% higher than what they were this time last year. We have a long way to go to bring the cost of logistics down to a far more palatable (and sustainable) level,” the association said in a press statement.
The Road Freight Association is a lobbying and negotiating body which, among others, influences the state of the industry, rates, the fuel price, and upkeep of the road infrastructure.
A further drop necessary
While lower basic fuel prices on petrol, diesel and illuminating paraffin has been widely welcomed, the realities of how transporters acquire diesel, how this is paid for, and the delays in being paid for the work done, still remain true.
“In a simple scenario: a truck with two 500 litre fuel tanks will now pay R1 530 less for every complete refuel (for 500ppm diesel). When this is multiplied by the number of vehicles and trips (refuels) a transporter has, the savings add up and release pressure on cash flow.”
During the third quarter of the year, fuel breached the 58% mark in daily operating costs and experts expect this to retreat back to below the 50% mark.
“That is extremely good news – but we need it to drop further,” the association said.
Meanwhile, the downward pressure on transport prices is also expected to flow through the logistics supply chains.
However, it will be a while before some price relief is felt by consumers. This weighs on the availability of stock on shelves at previous transport rates and the types of transport service contracts between clients and retailers, the associated stated.
“The continuous increases in the price of diesel has driven the cost of transport and logistics up to unimaginable levels.
“With roughly 85% of all goods moved through and around the country having a road leg at some part in the journey, the recent set of fuel price decreases will take some time to be felt by consumers, as the cost to transport goods slowly decreases.”
Price cuts expected elsewhere
The association is of the view that as fuel prices start to fall, a domino effect will ensue. Hopefully the first in a long line of such domino effects that will bring about a steady decrease to the cost of living.
If all goes well, everyday goods – from food to fuel, from clothing to electronic goods and everything in between – will be cheaper to consumers.
Furthermore, the continued and sustained fuel price reductions is likely to have an effect on inflation.
The basket of goods used by the Reserve Bank to alter the repo rate, will reflect a different picture and this will bring about a better financial experience for consumers, the association said.
“Finally, this may not be as bountiful a festive season as it has been in the past, but there are signs that things are going to get better. The recent GDP figures showed a better picture than expected and the trend in fuel prices will definitely help to improve those figures too.”
Sign up for Mzansi Today: Your daily take on the news and happenings from the agriculture value chain.