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Rand decline behind fuel price pain

29 January 2014

A dramatic slump in the Rand / US dollar exchange rate is the chief culprit in the hefty fuel price hikes announced today. This is the view of the Automobile Association which has said that if the Rand's depreciation continues unchecked, a price of R16 per litre at the pumps is possible in the medium term.

“The severity of the Rand's decline is reflected in the exchange rate numbers,” , the AA said. “On the 27th of December, a dollar cost R10.35. By the 27th of January, it cost R11.20. Meanwhile, international petroleum prices have ticked up slightly since our last review of fuel price trends in mid-January, so it's a double whammy for motorists.”

The AA said it was concerned that the knock-on inflationary effects of recent fuel price hikes would send further shocks into South Africa's economy. “Last year's credit data showed that almost half of credit-active consumers had an impaired credit record. We believe it will be very difficult for such people to absorb the effects of ongoing fuel price increases," the AA concluded.


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