Drive less to cheat high fuel costs- Kalili

The Namibian consumer will have to deal with the headache of less credit extension from banks and added to that high fuel prices this festive season, but experts doubt if savings will drop due to this hike.

With the mines and energy ministry having announced that fuel prices will tick up this week, this will be the second month Namibians have to deal with these costs with those for November having been hiked by 7c/l. 

Speaking to The Villager, FNB Namibia Head of Research, Namene Kalili, has said cost conscious driving, rather, will definitely see consumers struggle with fuel prices.

“This should translate into slower driving speeds, curbing of unnecessary traveling and more use of public transport. All these will certainly have a positive impact on the usual December carnage we see on our roads,” Kalili advises.

The economist points out that the real cost impact will be in the transport and agricultural sectors.

“The higher fuel price will increase distribution costs, which will feed into all consumer goods, while increasing farming costs for the agronomic producers, who have to produce,” he said. 

Simonis Storm Securities economist, Indileni Nanghonga, sees the 50c/l hike as “another blow for consumers”.

“The increase comes amid already depressed consumers and economic recession. Consumers should tighten their belts as hard times await this festive season. Consumers are currently facing heavy fuel inflationary pressure but respite will come from a moderation in food inflation,” she says. 

The only way out of the gripping vice of these hikes would be to brace up and face them head on as alcohol and tobacco inflation has also picked up slightly to 5.7% y-o-y end of October 2017 compared to 3.3% y-o-y levels seen in May 2017. 

“The Increase in fuel prices will erode consumers’ disposable income and put extensive pressure on households facing higher debt servicing. Unsecured lending has also increased and we expect this to continue over the festive season. Consumers should brace themselves for additional fuel price hikes in 2018,” she says. 

With rating downgrades having been one of the hot topics this month, Simonis Storm hopes that the recent downgrades have not put a damper on consumer’s outlook for the coming festive season. 

Nanghonga advises, “Whatever you are planning and wherever you may go this holiday, please keep in mind that the key to an awesome holiday is having your loved ones around you and your mood at all-time high, as most of the equity markets currently are. SSS therefore advices on less debt and less spending and save bonuses for hard times to come.”

Namibia Equity Brokers (NEB) investment analyst Ngoni Bopoto says it is a given that any hike in fuel prices will always weigh down on the consumer purse, festive season or not.

“You know obviously it will dig into the consumers’ pockets, it’s a given. Its not about saying because we are going into the holiday. Whenever fuel prices increase, there are obviously inflationary concerns etcetera,” said the economist.

Yet as the year comes to its consummation and employees walk home with bonuses, it may be that this may come in handy to carter for hiked prices and cushion savings.

However, the year has not been that good for most companies some of which are highly indebted with others having shut their doors especially in the contracted construction sector.

Yet Kalili says, “The December “bonuses” are 13th checks and are in most cases part of the remuneration packages and as such will not be determined by the employer’s financial performance.”

Fuel prices in the coastal town of Walvis bay tend to be lower than those of other land-locked towns, and there is a fear that these prices may lead to hording and fuel scarcity this December.

Kalili objects this, “Highly unlikely. The coast is adequately stocked with fuel and plus price advantage is not worth the effort of horning 60l of fuel.”