High fuel prices in South Africa is caused by the weak Rand and not higher oil prices as government would want you to believe
Category: Financial markets, economics and fuel prices
Date: 13 September 2023
Date: 13 September 2023
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Every time there is an announcement on the latest fuel prices, government officials are always quick to point to higher oil prices as driver of fuel price increases. The sad reality is over time oil has remained relatively flat while taxes on fuel has increased and the exchange rate weakened a lot. So the main driver is the weak exchange rate (and that is a reflection of a poorly run country and economy).
So rising fuel prices is mainly due to poor or non implementation of pro economic growth policies by the government of South Africa |
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Weak Rand not crude oil prices is responsible for higher fuel prices
As we mentioned in the introduction its not higher oil prices that is causing South Africa's higher fuel prices, but rather the continued weaking of the South African Rand. The image below shows that the average monthly oil price in January 2010 is very similar to the average monthly oil price in August 2023 (with it hovering around the $80 mark).
However the South African Rand (ZAR) is a lot weaker now (averaging R18.78/$1 in August 2023) compared to it averaging R7.46/$1 in Janaury 2010. As we have mentioned a few times before a countrys exchange rate is a barometer of how the rest of the world views how a country is being run, in terms of economic growth, fiscal stance and spending and general economic policies. Clearly the rest of the world has been telling the South African government for decades that the country and its economy is being run poorly. And this was only realised by government earlier this week when it realised the South African state coffers is in deep trouble and they might not have a way out of their trouble. Thats what 30 years of maladministration and cadre deployment gets you.
However the South African Rand (ZAR) is a lot weaker now (averaging R18.78/$1 in August 2023) compared to it averaging R7.46/$1 in Janaury 2010. As we have mentioned a few times before a countrys exchange rate is a barometer of how the rest of the world views how a country is being run, in terms of economic growth, fiscal stance and spending and general economic policies. Clearly the rest of the world has been telling the South African government for decades that the country and its economy is being run poorly. And this was only realised by government earlier this week when it realised the South African state coffers is in deep trouble and they might not have a way out of their trouble. Thats what 30 years of maladministration and cadre deployment gets you.
Taxed to death so more can be stolen?
Added to the weak exchange rate since 2010 the South African government has piled on the taxes on fuel prices, as it sees this as an easy way to collect additional tax revenues that it then squanders on corruption, inefficient and loss making state owned enterprises and just general inefficient government services.
So ultimately its the government in charge that is responsible for the economy and how its run, and its reflected by the exchange rate which then has an impact on the fuel prices. So next time you want to know what is causing high fuel prices in South Africa, think about the exchange rate and why its so weak and what it says about how this coutry is run. And the answer will become clear, the current government is to blame for the high fuel prices right now. No one and nothing else. They cant even pin this one on apartheid, as they do with all their other failings.
So ultimately its the government in charge that is responsible for the economy and how its run, and its reflected by the exchange rate which then has an impact on the fuel prices. So next time you want to know what is causing high fuel prices in South Africa, think about the exchange rate and why its so weak and what it says about how this coutry is run. And the answer will become clear, the current government is to blame for the high fuel prices right now. No one and nothing else. They cant even pin this one on apartheid, as they do with all their other failings.