Fuel price hike will impact consumers and the road freight industry – RFA

16th February 2024 By: Irma Venter - Creamer Media Senior Deputy Editor

Fuel price hike will impact consumers and the road freight industry – RFA

Gavin Kelly

Fuel is rapidly crossing the 50% mark as a share of daily road transport operating costs, depending on the type of transport operation, with rising costs likely to be passed on to the consumer, says Road Freight Association (RFA) CEO Gavin Kelly.

He says there are “dire forecasts” of large fuel increases heading towards the South African economy in March.

These price hikes are owing to rising international fuel prices, spurred on by geopolitical tensions, as well as rand weakness against major currencies.

“Whilst we have seen fuel coming off huge highs in 2022 and 2023, prices are definitely not where the local economy would like them to be,” notes Kelly.

“This means that any gains achieved in mid-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, depending on the arrangements that transporters have with their clients. 

“Some transporters run day-to-day pricing, whilst others may have contracts that determine how and when (if any) increases or decreases are factored in.

“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 as the cost to transport goods increases,” explains Kelly.

“In the short term, general transport costs will rise – from food to fuel, from clothing to electronic goods and everything in between.”

Kelly is hopeful there will be some relief in international fuel prices soon, and that the rand will recover against major currencies. 

He adds that businesses may opt to reduce the volumes being transported as the cost of transport increases, and as consumers’ shrinking disposable income continues to factor into retail and other sales.

Transporters will feel all of these factors impact their businesses, says Kelly.

“Many transporters will not be able to muster the guarantees required for purchasing fuel on credit – required, as customers take up to 90 days to pay after the transport has been provided.

“[Before then, the] transporter has paid the driver, covered other costs, and still needs to operate a business. Some just won’t have any cash to carry themselves for 90 days.”