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Petrol price likely to rise by 50 cents a litre

Petrol price likely to rise by 50 cents a litre

The new petrol price is still well below a true market price, but it is a start. Price controls fuel a huge racket: importers are paid the difference between the market rate and the South Africa one. The government argues that the subsidy helps the poor. In fact the scheme is a cash machine that spews public money into the hands of fuel importers, employees of the state-owned oil company and government officials who collude to pocket cash paid to subsidise fictitious imports.

South Africa
will see the first real result of a depreciating rand in May when petrol is expected to increase by about 50 cents a litre. The Automobile Association's mid-month data indicates petrol is to increase by up to 55 cents a litre, with diesel likely to go up by 39 cents a litre.

South African motorists should brace for a significant increase in the price of fuel from the beginning of May, with mid-month data from the Department of Energy so far pointing to a petrol price hike of around 50 cents a litre, while diesel costs could increase by approximately 39 c/l. The fuel hikes will likely be the first major expense that ordinary South Africans will be faced with in the wake of SA’s recent political events and credit downgrades to junk status.

The Automobile Association says the country's downgrade to junk after President Jacob Zuma's controversial cabinet reshuffle will start haunting the country in months to come.More expensive fuel will have a knock-on effect, leading to price hikes of most products. The Automobile Association says the cost of diesel is also expected to rise considerably.

The CEO of Debt Rescue Neil Roets says the fuel increase will have a ripple effect throughout the economy. Lesiba Mothata of Investment Solutions says income is not growing while inflation is likely to remain high.The only way to match the supply of and demand for fuel and dollars is to let the market determine the price of both. Some analysts think that the government’s raising of fuel prices is a prelude to letting the currency slide. 

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