Johannesburg - The dramatic increase in the cost of petrol and diesel today (November 2) could further crush the dreams of small businesses hoping to come out alive following the embattled Covid years.
The Department of Mineral Resources and Energy has announced that both grades of petrol would increase by 51 cents a litre from today, November 2. Diesel will see much steeper increases of R1.43 (500ppm) and R1.44 (50ppm). This increase sees diesel costs hitting highs not seen before.
Following these increases, a litre of 95 Unleaded petrol will cost R22.22 at the coast and R22.87 in inland regions, and 93 Unleaded R22.57.
Diesel will vary between outlets. However, you could pay about R25.11 (coast) and (R25.74) inland for 50ppm.
The Automobile Association warned a diesel price hike would hit consumers as manufacturers would likely increase their transport costs down the line to them.
Small and mid-size enterprises (SMEs) - where transport of goods is the lifeblood of their economic activity - would feel it hardest.
The hike will most likely have a big impact on profitability, and if you run a fleet of cars, you will feel it straight away. If your business outsources deliveries, you will know a price hike is coming that will affect your bottom line.
Even before these price hikes, fuel remains one of the most expensive operating costs for SMEs, making it essential for them to actively manage this expense to avoid it negatively impacting profit margins.
Decreases earlier this year in the price of fuel may have brought a certain degree of relief to business owners. However, this recent hike will not be welcomed.
Jesse Weinberg, co-head SME at FNB, says the tough economic environment, including additional cost pressures, such as load shedding and fuel price hikes, makes it essential for SMEs to constantly review their cost-cutting strategies and find creative ways to make their businesses more profitable.
A knee-jerk reaction may be to immediately pass costs on to already hard-hit clients and consumers. However, before you do that, consider ways to save on fuel costs.
Weinberg shared some ways businesses can save on their monthly fuel spend.
“For fuel, in particular, there are a number of strategies SMEs with a few vehicles can consider, given the volatile nature and economic factors that impact fuel prices,” said Weinberg.
1. Maximising loyalty and reward programmes
Similar to how these programmes have been successful in providing some form of relief for consumers, SMEs can benefit even more considering the number of vehicles they own and fuel spending every month.
“Fuel remains a key expense for businesses which operate vehicles. As such, SMEs are encouraged to maximise fuel rewards to reduce the impact of fuel costs on their bottom line, especially in light of inflationary pressures such as the rising cost of goods and materials, electricity, and wages, amongst many others,” said Weinberg.
For example, an FNB small business client with a few vehicles currently has the potential to earn up to R6 per litre back in eBucks for fuel purchases made at Engen. “As a result, businesses can save just over 20% of their fuel spend with the difference invested back into their business.“
Check with your loyalty programmes, as many banks have them, and see how you can score in bulk.
Importantly, all drivers should be trained and equipped to apply the correct earn rules when filling up, such as which debit cards to use to earn loyalty points.
2. Vehicle maintenance
During tough economic times, some small businesses may opt to skip vehicle maintenance to cut costs. Although this may appear to work in the short-term, it has long-term financial and possible risk ramifications for the business.
Not only do poorly maintained vehicles often consume more fuel, but unforeseen vehicle breakdowns are expensive and can impact a business's reputation by impairing its ability to deliver to customers.
Keep your vehicles well maintained.
3. Technology
SMEs should also consider investing in telematics that helps monitor fuel usage as well as driving behaviour, such as speeding, which can result in possible fines but also contribute to higher fuel bills.
SMEs should also consider using navigation apps and systems to avoid heavily congested routes, which often result in higher fuel consumption and delays.
Navigation apps, such as Google Maps and Waze, have proven to save businesses money on fuel, particularly during load shedding when traffic lights are out.
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