How fuel price hike will hurt the economy

The petrol price in South Africa has hit a record high of 46 cents per litre, prompting concerns about the impact on the country's economy. With estimates suggesting that it could reach as high as R20 per litre by next year, motorists are bracing themselves for higher costs at the pump. Stephen Meintjes, Head of Research at Momentum Securities, weighed in on the situation during an interview with CNBC Africa. Meintjes highlighted the factors driving the increase in fuel prices, including the weakening rand and rising oil prices in dollar terms. He noted that uncertainties such as US sanctions on Iran and production cuts by OPEC have contributed to the temporary spike in oil prices. Additionally, the ongoing trade negotiations between the US and China have added to the volatility in emerging market currencies, including the rand. While the US is pushing for more concessions from China, the potential impact on South Africa remains uncertain. In the event that the trade talks do not yield a favorable outcome, South Africa could face additional challenges, particularly in the face of tariffs on steel and aluminium. However, Meintjes pointed out that despite these uncertainties, emerging markets still offer better economic growth prospects compared to developed markets. Investors in South Africa and other emerging markets may need to carefully navigate the current environment to mitigate risks and capitalize on opportunities.