Fuel Hikes – Business Feels the Pinch

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By Tapiwa Mkabeta WINDHOEK Recent increases in petrol and diesel prices will compel businesses to adjust production costs and product pricing to cushion the negative effect of the price hike. The fishing and transportation sectors, due to the nature of their operations, are apparently the worst affected. Unleaded petrol went up by eight cents per litre and 16 cents for diesel. Mihe Gaomab II, an economist with the Namibian Economic Society (NEC), says the recent fuel increases will definitely affect both the shipping and fishing industries as well as the transportation sector. Gaomab said that the fuel increases have an adverse effect on production in the various industries. He said that though not directly connected, airlines are faced with the same predicament of the recent global increase in jet fuel to US$66 (approximately N$396) per barrel, which is bound to affect the aviation industry. The rate at which fuel prices have increased in the past ten months is a cause for concern. Some companies have had to reconsider their production costs in the aftermath of the fuel price hikes. Like many other transport companies, the FP du Toit Group is trying to adjust to the recent fuel hikes. Ralph Dorfling, the managing director of the company in Namibia expressed concern about how the fuel hikes would affect the company’s customer base. “It is unfortunate you can never predict when you are going to have another fuel increase,” said Dorfling. Transportation companies operating within the borders and outside the country are faced with a predicament with the difference in fuel pricing across the borders. Dorfling pointed out how fuel forms the largest expense component in the transportation industry, particularly for Namibian companies. With many companies conducting budget revues during the year, coping with such fuel hikes has been a constant battle in the transportation and fishing industry. High fuel prices are one input that can adversely affect fish processing in the fishing industry. Some fishing companies have expressed concern about how such hikes have hindered business, where some firms are struggling to protect and keep their customer bases. In the fishing sector, some companies are trying to work through the fuel increase by cutting all possible costs in the available avenues. For most fishing companies that are export-based, the exchange rate has also not been favourable for business. As much as the industry has felt more than a pinch from the fuel hikes, with the rate at which global fuel prices are increasing and Namibia being a small player in the global industry, the fuel prices have become a bitter pill to swallow.