‘Fuel price hike will dampen the impact of the recent rate cut for SMEs’

Fuel prices are due to increase at midnight and motorists will pay 72 cents more for 95 octane and 93 octane will go up by 69 cents.

This follows the fuel price increase announced by the energy department.

Small and medium-sized enterprises (SMEs)

Jesse Weinberg, head of the SME customer segment at FNB Business, said the fuel price increase would dampen the impact of the recent interest rate reprieve for small and medium enterprises.

He said the substantial increase posed a cashflow test for SMEs as such businesses are predominantly run on very tight budgets.

“While the latest interest rate cut would have provided necessary relief for SMEs that are utilising credit facilities or servicing debt, the impact will most certainly be diluted by the fuel price hike. We also need to consider the fact that SMEs may still face further increases in expenses due to potential upward adjustments in electricity prices,” said Weinberg.

“This simply means small businesses will have to keep a firm grip on the management of their finances to get through this period. Those that are in a position to minimise their reliance on debt should do so without delay and in turn prioritise saving for rainy days.”

Agriculture

Dawie Maree, head of marketing and information at FNB Agric outlines the impact on Agriculture said, “The fuel increase comes at a time when agriculture is heading for the harvesting of summer crops and therefore will increase production costs.”

Maree said the immediate impact will be felt most by producers as input and distribution costs will go up.

“Distribution costs for agricultural produce in South Africa are already high with almost 80% of grain transported by road; therefore the increase will further squeeze producer margins. Eventually the impact of the increase will be inflationary as the costs of the producer will be passed on to the consumer,” explained Maree.

“On the upside, the increase will not have an immediate impact on farmers as it is currently a low consumption month, however input costs over the long run are bound to increase with the higher price of diesel, which in the end will drive the cost of farming up.”

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  AUTHOR
Staff reporter

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