The increase in fuel prices for September will force transporters to increase their pricing to cover the higher diesel costs, member organisation Road Freight Association (RFA) CEO Gavin Kelly says.

The Department of Mineral Resources and Energy has announced that the diesel price will increase by R2.76 a litre for September.

That will raise inland pump prices to R23.05 and R23.28, respectively.

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

Kelly informs that these prices were last seen in June 2022, the first in a four-month climb that saw diesel prices reach heights of R25.74 in November 2022. July 2022 had also reached R25/ℓ.

Road freight transporters use both petrol and diesel – but diesel is the main fuel in most road operations, Kelly points out.

He explains that while road freight transporters increasing their prices sounds like an “easy” or simple process, there will be transporters who will not be able to increase prices as they are either contractually bound or they would just price themselves out of the market, and thus might not be able to carry on running the business.

“One of the biggest challenges faced by transporters is the need to fund operations (the use of fuel) whilst only being paid months after the work has been done – in some cases up to three months afterwards.

“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,” Kelly says.

He says that ever-increasing numbers of the organisation’s members are expressing how the fuel cost strain is affecting survival – with more and more businesses under strain or in business rescue, while customers reduce volumes that need to be transported or even curtail stock movement, depending on consumer consumption levels.

“Transporters will feel this impact on their businesses. Many transporters will not be able to muster the guarantees required for purchasing fuel on credit (this is required as customers take up to 90 days to pay after the transport has been provided) – and the transporter has paid for fuel, paid the driver, covered other costs and still needs to operate a business – whilst others just don’t have any cash to carry themselves for 90 days.

“Whether we like it – or not – the continuous increases in the price of diesel inevitably drive 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 (you and I), as the cost to transport goods increases,” Kelly warns.

He points out that fuel breached the 50% mark in daily operating costs during the third quarter of this year.

“Now, as we head into the final months of 2023 – with this 3.6% increase – the sector is heading towards the 60% level seen during the last months of 2022. That’s a huge increase in cost to company that simply cannot be borne by the company,” Kelly emphasises.

He avers that that cost will, in most cases, be borne by the consumer, with people to pay more for everything.

“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.

“Transport costs will rise. There is no alternative for transporters – and those that cannot afford to carry loads at the rates or prices customers are prepared to pay, will simply close down,” Kelly posits.

He warns of more business closures, greater unemployment, less business and revenue driven through the transport subsector industries, and of higher prices of goods.

Kelly adds that these sorts of fuel price increases could wipe out the gains in taming inflation that the South African Reserve Bank has won.

Moreover, he says that, should a rate increase occur, this, together with transportation costs for goods and services, will grip the consumer in another tight financial squeeze just before the festive season – where traditionally many retailers have generated income to carry them through the financial year.

Kelly says that, as was the case last year, this may reduce any chance of a lucrative retail season as has been enjoyed in the past, with many consumers to stay home and curtail spending.