South Africa’s diesel price spikes

South Africa’s diesel price will this week climb by the most in three years, spurred by higher international fuel costs and a slump in the rand, adding to upside risks to inflation. Gasoline pump costs will increase by the most in 14 months.

The wholesale price of diesel that’s used in agriculture and for emergency power generation will rise by as much as R2.84 per litre on Wednesday, the Mineral Resources and Energy Minister Gwede Mantashe said in a statement.

That’s an advance of 14% from August, the biggest monthly percentage increase since mid-2020, when prices fluctuated sharply because of low demand as the economy shut down during the coronavirus pandemic.

The retail price of 93-octane and 95-octane gasoline will increase by R1.71 per litre. The maximum cost of illuminating paraffin, used for cooking and lighting in areas where many people don’t have access to electricity, will jump by as much as R3.70 per litre.

The increases may add to pressure on household finances and inflation that eased to a two-year low in July of 4.7%, close to the midpoint of the central bank’s 3% to 6% target range, where it prefers to anchor price-growth expectations.

“This unrestrained escalation in the cost of living will poison the upcoming wage negotiations and will automatically push our affiliates to demand above-inflation salary adjustments for our members,” the Congress of South Africa Trade Unions, the biggest labour federation, said in an email statement.

The central bank’s Governor Lesetja Kganyago reiterated in an interview with Bloomberg last week that the job on inflation isn’t done yet, more than a month after its monetary policy committee paused its longest phase of tightening since 2006.

Measures taken to tame inflation appeared to have started to pay off, he said, but risks persist, including a potential weakening of the exchange rate, higher global energy prices, rate increases in developed markets and ongoing power cuts in South Africa.

The currency has depreciated about 6% against the dollar since the start of August.

Fuel has a weighting of almost 5% in South Africa’s consumer price basket.


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