Consumers likely to feel impact of Gordhan charges in their pockets

Stanlib’s Kevin Lings says shaky political environment has aggravated the depreciation on rand.

Picture: EWN

JOHANNESBURG - Chief economist at Stanlib Kevin Lings says although the current political environment which involves a case against the Finance Minister Pravin Gordhan and the National Prosecuting Authority (NPA) has no direct impact on crude oil price, it has aggravated the depreciation on rand, which subsequently lead to the fuel price increase.

This follows the energy department's announcement that the price of petrol would increase by 45 cents, while diesel is set to rise by 63 cents a litre from next Wednesday.

The illuminating paraffin will cost 76 cents more per litre.

Lings says consumers should also expect increase in fuel tax next year.

"If we find that there's further political turmoil, there is a risk that the currency weakens further in which case we'll see further pressure on the petrol price. Right now the oil price has moved up to around $50 per barrel, and if the currency continues to weaken then clearly we'll face higher petrol price increases."

At the same time, the Automobile Association (AA) says the NPA's decision to charge the finance minister with fraud continues to negatively affect the price of petrol.

The AA's Layton Beard says the rand incurred heavy losses at midmonth in the wake of the NPA's decision.

"The rand took heavy losses in the wake of the NPA's decision to charge finance minister Pravin Gordhan and although we have seen somewhat the strengthening of the rand, the deficit is still there and because of that the fuel price is going to go up."

THE NPA HIGHLY CRITICISED OVER GORDHAN CHARGES

The NPA's decision to charge the Finance Minister has been highly criticised by legal experts, political and business leaders, with calls for the charges to be withdrawn.

It was revealed earlier in the week that the prosecuting authority is still collecting evidence against Gordhan more than a week after announcing he would be charged with fraud.

Freedom Under Law and the Helen Suzman Foundation say this is information the NPA should have gathered long before any decision to prosecute was made, and the NPA's failure to do so underlines the irrationality and unlawfulness of its decision.

PPRESIDENT ZUMA MUST ACCOUNT FOR POLITICAL INSTABILITY

While Cabinet has thrown its weight behind Finance Minister Pravin Gordhan, an economist has said the President must full responsibility for the political instability in the country.

Commenting ahead of the minister's mid-term budget statement in Parliament earlier this week, economist Iraj Abedian said, "The minister of finance faces political machinations coming from within his party and Cabinet, and at the same time is facing very difficult economic conditions."

Along with the charges against him, Gordhan is facing a stagnant economy, protests around higher education funding and the threat of a ratings downgrade are just some of the pressures.

"We're not doing well at all and that is where no one other than President [Jacob] Zuma should take full and final responsibility for it," lamented Abedian.

Additional reporting by Stephen Grootes & Gaye Davis