As long as government doesn’t take the opportunity of a collapsing oil price to pass-through a fuel levy to cover eTolls and bail out Sanral (don’t share the idea with them), petrol prices may be heading back to levels last seen in 2012. That means a price of around R10 a liter for 95 ULP petrol in Gauteng could be on the cards.
The global oil price in Rand terms has fallen around 40% from the levels of late 2013 and most of 2014.
And the pump-price follows this global oil price pretty closely, although is less volatile, because it is regulated. As things stand there’s around a R1 per liter price decline coming in January.
Lower CPI inflation, cheaper to run your and Eskom’s generators, and likely to keep the Reserve Bank in a friendly mood with unchanged interest rates for longer.
This is according to Engineering News, following ‘acting transport director-general’ Mawethu Vilana’s comments in parliament’s transport portfolio committee yesterday. Watch this number inflate sharply in coming years as the cost of building materials, labour and government waste also gets added in (for more on this last point listen to this interview I did earlier this year on Moneyweb).
I would also point out that this is only the resources required to fix roads in the “poor and very-poor” category. When we consider that what government believes are ‘good’ roads are also well below original ‘spec’ and in need desperate need of maintenance and investment spending, this bill starts to ramp sharply higher.
The problems here are the same as elsewhere in the public sectors. As I wrote back in early 2012 regarding electricity infrastructure:
“The maintenance backlog of municipal electricity infrastructure is at about R35bn and rising by R2,5bn a year, Parliament heard yesterday. Municipalities are failing to invest in infrastructure because they need funds for operational expenses and because of uncertainty over the future ownership of the assets,” reports Business Day.
Back of the napkin calculation based on the above figures shows that maintenance of municipal electricity infrastructure has been neglected for about 14 years.
This is a problem underlying each and every service provided by government, including water utilities. Taxation, whether direct or indirect, is going to climb dramatically to pay for crisis management, ala Eskom tariff hikes.
A major reallocation of capital into these areas will be required that will be a huge drain on the private sector and the economy.
What all this means is that tax rates and indirect taxes can be expected to rise sharply in years ahead – it’s negative for the private sector and disposable incomes. I’ve also written lots about this trend in crumbling water infrastructure (here’s an article with several links to those water articles).