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Another fuel hike on the cards, here’s how small businesses can soften the blow

Another fuel hike on the cards, here’s how small businesses can soften the blow

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Johannesburg – Early data made available by the Central Energy Fund points to yet another petrol price increase in December.

Based on the latest available daily data and thanks to a stronger rand, consumers could be looking at an increase of between 50 and 70 cents.

Small and mid-size enterprises (SMEs) – where the transport of goods is the lifeblood of their economic activity – would feel the petrol price hike the hardest.

Diesel users on the other hand may be in for some much-needed relief after the price of diesel reached record highs in the past few months. The current wholesale price of 500ppm is sitting at R25.48.

The price of diesel could decrease by more than R1 per litre at the beginning of next month, if the current daily trends in over-recovery stay the same.

This decrease will have a ripple effect and possibly ease the burden on businesses that have to run generators to maintain productivity, as Eskom continues to struggle to keep the lights on.

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.

The fuel price hike earlier this month added to the pressure that is being felt by businesses, due to increases in the interest rate.

Jesse Weinberg, co-head of SMEs at FNB, says the tough economic environment, including additional cost pressures, such as load shedding and fuel price hikes, make 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. But 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 their monthly fuel spending.

“Fuel remains a key expense for businesses that 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, among 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 its customers.

Keep your vehicles well maintained.

3. Technology

SMEs should also consider investing in telematics that help 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 provdn to save businesses money on fuel, particularly during load shedding when traffic lights are out.

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