Fuel and Electricity Price Hikes to Present Cash Flow Challenges for SMEs
The additional fuel levies of 52 c/litre and fuel increases that came into effect on 1 April as well as the most recent electricity price increases approved by The National Energy Regulator of South Africa (Nersa), are expected to be a further burden on South African small and medium-sized enterprises (SMEs). This is according to Christo Botes, executive director at Business Partners Limited who says that these increases could present a cash flow challenge for some small business owners, if not addressed.
“Small business owners should review and if necessary rework their budgets for the year ahead in order to accrue for these increases. Business owners can start by recalculating the operational costs of the business. Once these additional increases are allocated in the budget, sensible ways should be considered on how these costs can be reduced. Business owners should also be aware of the fact that suppliers might pass on their own price increases to the SMEs buying from them.”
He adds that with these increases, it is now more important than ever for small business owners to keep a firm grip on the management of the business’ finances and to find innovative ways of managing their cash flow without resorting to additional debt. “Businesses will always be faced with unexpected increases, it is therefore imperative for small business owners to always understand the ins and outs of their businesses, plan for this potential risk and have mitigating initiatives to turn adversity into opportunity,” concludes Botes.
On 1 April 2018 95 ULP and LRP petrol increased by 72c/litre, 93 ULP and LRP petrol increased by 69c/litre, and Diesel increased by 65.20c/l. Electricity prices increased by average 5.23% on 1 April 2018 for direct Eskom customers and will increase by average 7.32% on 1 July 2018 for municipalities.