The department of mineral resources and energy said the new fuel prices would come into effect on Wednesday. (Waldo Swiegers/Bloomberg via Getty Images)
The Russian-Ukrainian war might be raging thousands of kilometres away from South Africa, but it will probably hobble plans by local companies to get employees back to offices after two years of working from home because of the Covid-19 pandemic.
The war has driven fuel prices and is likely to push travel costs higher, hitting the pockets of workers already grappling with the economic fallout from the pandemic.
“There was an expectation this year that there would be a return to the office but that will likely be postponed for longer because of the petrol price increase as it does increase the appeal of work from home,” said John Loos, a commercial property finance economist at FNB.
According to the Bureau for Economic Research, South African motorists can expect another steep hike in petrol prices to a new record high in April because the Russia-Ukraine war is pushing international oil prices up.
Suppliers and manufacturers are likely to pass on other costs to consumers as they struggle to absorb the rapid fuel increases, according to the bureau.
As the Automobile Association had already warned, South Africans were hit by a huge jump in fuel prices at the beginning of March, which pushed the price of petrol above R21 a litre for the first time.
The department of mineral resources and energy will announce April prices in about three weeks time and is likely to show a similarly steep rise.
Russia is the world’s third largest producer of crude oil after the United States and Saudi Arabia.
Oil prices have rocketed since Russia’s invasion of Ukraine, almost surpassing the highs reached during the global financial crisis in 2008 when crude oil was $145 a barrel.
On Tuesday, the US announced it would ban the import of Russian crude oil and target “the main artery of Russia’s economy”. This pushed the Brent crude oil price close to $140 a barrel. It has since subsided to $124.
FNB’s Loos said rising fuel prices would make working from home even more appealing for employees, who also like the greater flexibility over the past two years. This sets up a potential conflict with employers, who have lately been trying to herd workers back to the office.
“This is similar to the 2008-9 financial crisis, there was a big inflation surge as a result of an oil price shock and a global food price inflation shock. So, it’s a similar picture but the big difference is that work-from-home is now acceptable,” Loos said.
Fuel intensive transport
“We run on quite fuel intensive transport; we don’t have public train transport like London, for instance, which is probably less likely to see big fare increases as a result of petrol prices. We are a more petrol dependent country,” he said
Trend analyst Dion Chang, the founder of Flux Trends, said although fuel costs had started escalating before the war, the work-from-home phenomenon had offered most households a buffer.
“Employees will get a shock of filling up their cars with new escalating petrol prices — and it’s just going to get worse as the war carries on — because that is something they didn’t really feel in the last 18 months,” he said.
“The cost of living, specifically in 2022, is really starting to hit home to people. That on top of the petrol is going to be a huge double whammy. It will affect the drive to return to the office and will especially affect those who have to travel long distances and take public transport.
“Already for people that use taxis, those travel costs chomp up a huge part of what they earn a day,” Chang added.
He said that in the new post-Covid-19 era companies needed to humanise their businesses by being mindful of living costs.
Property rentals down
The work-from-home phenomenon has hit office rentals hard over the past two years, although Loos said the push for employees to return to the office was not necessarily emanating from property owners.
Property group Emira Property Fund, which owns The Bolton residential building in Johannesburg’s upmarket Rosebank area, said a large number of tenants had moved out.
“[The Bolton’s] occupancy levels dipped to 92.2% at end-December 2021 but … should increase … as Rosebank-based corporates return employees to their offices,” the group said in a recent statement.
Financial services company Momentum’s chief executive, Hillie Meyer, predicted a hybrid way of work as Covid-19 showed signs of becoming endemic when she unveiled the company’s six-months results this week .
“I am looking forward to connecting with colleagues more regularly in a physical office environment. We want to get optimal productivity back on track in areas such as client service where delivery was impacted as a result of people working from home,” she said.
But Chang argued that companies needed to evolve with the times and “productivity needs to be re-examined on what is your output rather than bums on seats, from nine to five, which still does not guarantee productivity”.
“Middle management has been driving the call for workers to return to the office; it’s from senior management and executives who think: ‘we have this building, we pay rent, we can’t get out of our lease, we are haemorrhaging money, we want people back at the office.’”
Anathi Madubela is an Adamela Trust business reporter at the M&G
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