The impact of the increase in petrol and electricity prices

South Africans have been told to brace themselves for more increase in petrol prices, just when we were digesting the shock of the rise in electricity costs. It is all downhill from here.

The shock of surging electricity prices has left South Africans in disbelief as this has a significant effect on the economy and many households. The price hikes will take the average electricity tariff in South Africa from just over R1.33 per kWh to around R1.46. The increase will take effect from 1 April 2022 for Eskom customers.

Electricity is generally a relatively small proportion of a firm’s overall operating expenditure or a household’s consumption expenditure. Still, it is nonetheless critical for operating machinery and the running of lights and appliances.  

Energy also leads to creating new markets, businesses, and job openings, which provide more opportunities for individuals to earn an income and lift themselves, their families and their communities out of poverty. A lack of consistent access to reliable power costs businesses and the economy.

We gained control over the light in homes and offices, independent of the time of day. The electric light brought networks of wires into homes and offices, making it relatively easy to add appliances and other machines. Electric power improved industry in three significant ways. First, factories no longer had to rely on large steam engines to power machines by using electric power. Electricity provided a cheaper, more convenient light source.  

Rising fuel prices impact citizens’ lives because steep fuel prices lead to higher inflation. It affects the prices of other essential goods. The value of essential commodities like food, medicines etc., have been adversely affected by a rise in fuel prices. An increase in the fuel levy might lead to households experiencing decreased income, employment and returns to factors used for production. Looking at the production side, firms are affected by fuel prices as their input costs depend on transportation and some petroleum products.

South Africa is currently recovering from Covid 19, and the unrest and load shedding are not making things any better. Many companies will re-look at working from policy to accommodate their employees and look at salary increases that will considerably strain their cash flow. Hopefully, the government will re-look at the increases in petrol and fuel as many people will negatively be impacted.

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