Photo by Skitterphoto
By Viresh Harduth, Vice President, Small Business, Sage Africa & Middle East
The price of all grades of petrol has gone up by R1.27 /litre, adding to the hefty petrol price increases South African businesses have endured over the past year. Diesel, essential for generators and heavy goods vehicles, has also seen stiff price increases of 30 cents for 500ppm and 31 cents for 50ppm.
The continued conflict in Ukraine coupled with a weak rand, means oil prices are likely to be volatile throughout 2023. Higher fuel prices spell more pain for businesses already facing harsh economic headwinds from higher inflation, load shedding and low economic growth. Small and medium businesses (SMBs) will need to shift strategies to be agile to navigate these conditions.
One way is to look at the impact of petrol prices on their business. Not only does the fuel price affect direct costs like transportation of goods, but it also affects suppliers’ operating expenses, your customers’ disposable income and living expenses. A higher fuel price stokes inflation across the board. This unfolds at a time when you have limited scope to pass higher costs on to customers and clients.
As such, now is an ideal time for SMBs to think about how they can improve fuel efficiency and drive down costs in the longer term. You can achieve other goals such as reducing carbon emissions and improving overall business efficiencies by taking a holistic approach to managing fuel costs.
Here are some ways to counter petrol price increases.
- Re-evaluate vehicle usage
Most businesses can get some quick wins by optimising how they use their vehicle fleets. You can, for example, adjust delivery and travel schedules to avoid peak times in traffic. Navigation apps, such as Google Maps or Waze, can help you find the fastest route. You can also combine deliveries and errands into one trip, planning a route that reduces your overall mileage.
- Stick to remote and hybrid work as far as possible
Between traffic snarl-ups due to load shedding and high fuel prices, hybrid and remote work makes more sense than ever. Choose video and voice calls when there is no clear benefit to meeting face-to-face. Consider flexitime and remote working arrangements for teams to help people save money on petrol and use their time efficiently.
- Leave it to the professionals
If you’re still operating your own delivery vans and scooters, now is a good time to weigh up the costs and advantages of outsourcing. You might be able to save money by partnering with a logistics company that already has the benefit of scale and resources to handle your deliveries. You’ll also save on vehicle maintenance costs and insurance. If outsourcing is not an option, negotiate better rates with suppliers.
- Drive safely, efficiently and don’t neglect maintenance
Dirty air filters, underinflated and misaligned tyres, and irregularly serviced engines contribute to vehicle wear and tear and, therefore, higher fuel consumption. Maintained vehicles are also safer. Fast acceleration, driving in low gears, heavy braking, speeding, and revving all increase fuel consumption. Many insurers and tech companies provide telematics technology that helps you to monitor employees’ behaviour behind the wheel and reward good driving. This helps reduce the number of accidents, too.
- Consider solar
Given the present energy crisis, many SMBs are spending a fortune on diesel or petrol to keep their generators going. Now might be a good time to speak to an energy specialist. Do some calculations about how the capital and operational costs of moving towards solar, batteries and an inverter compare to the ongoing costs of running a generator.
Bear in mind that you can start off with the inverter and batteries today to get a backup power supply, and then add solar later down the line to reduce your electricity bill. This is a cleaner, quieter, and more environmentally friendly alternative to generators. However, solar might not suit businesses running commercial fridges or heavy industrial machinery.
- Remember to claim your tax deductions
As a small business, you can also claim a tax deduction for all business-related travel expenses. However, SARS won’t remind you about this. Consider keeping a logbook to note all your expenses. This will make the tax return process easier.