Fuel levy increase could hit businesses hard
The anticipated fuel levy increase will not only negatively impact consumers and businesses but also place importers under increased pressure in already challenging market conditions, says Adam Orlin (pictured), Head of Investec Import Solutions. Orlin says:
"With several economists of the opinion that the price of petrol and the fuel levy will continue to rise this year, the knock-on impact this will have in the South African market will be significant. The transport industry is already operating under incredibly low margins so any additional increases could be quite damaging."
A further increase in transport costs will surely follow, as the industry attempts to mitigate the additional economic expenditures. Importers will need to find more innovative ways of offsetting costs and pro-actively plan around this, given their reliance on the transport industry for the distribution of goods from the ports of arrival. Even though freight handling has been consistently upgraded since the 2010 World Cup across airports and sea ports, the challenge lies in getting the goods reliably (and cost-effectively) transported to company warehouses.
"There is, unfortunately, no silver bullet to addressing higher fuel levies. Despite importers doing future-forward planning around these increases, the reality sees consumers ultimately paying the price of a leaner supply chain. Profitability is already under the spotlight so decision-makers at importers and transport companies are feeling the pressure to do more than simply raising prices."
Despite the negative sentiment around the fuel levy increase and the economic challenges this creates, Orlin says there are also opportunities for importers to find even more innovative ways of using available technologies and other solutions. Simply put, importers will have to identify other ways of delivering value, he concludes.