SME costs rise as fuel, forex and cross-border pressures intensify

SME costs rise as fuel, forex and cross-border pressures intensify

By Adrian Ephraim

SOUTH Africa’s June fuel price adjustment told two stories at once. Petrol rose by R1.43 per litre, while diesel was cut by between R2.62 and R3.25 per litre. On the surface, that looks like good news for diesel-reliant freight operators.

Look closer, and the real story for South Africa’s SMEs isn’t what happened at the pump. It’s what’s happening underneath it.

It’s not the price, it’s the dollar

South Africa imports nearly all its refined fuel, priced in US dollars. The average Brent Crude price rose from 101 USD to 104.59 USD over the review period, driven by US-Iran tension and disruption around the Strait of Hormuz. The rand strengthened only marginally, from 16.65 to 16.52, doing little to soften the impact.

“Fuel costs don’t exist in isolation,” says James Booth, Head of Revenue at Verto. “They feed directly into transport, logistics, imported goods, supplier pricing, and ultimately the cost of doing business.”

Because fuel is dollar-denominated, every move in the rand amplifies or cushions what local businesses pay. A weak rand doesn’t just make imports costlier, it makes the fuel that moves those imports costlier too.

Three moving parts, one small business

For an SME trading across borders, the fuel adjustment lands on top of two other variables moving at the same time:

• Fuel costs shape transport and logistics pricing, feeding into delivered cost of goods
• Exchange rate movements affect what imported inputs and finished goods cost in rand terms
• Cross-border payment costs affect how much of a payment to an overseas supplier actually lands, after fees and spreads

A large corporate can hedge currency exposure or absorb a bad month. An SME importing stock from a regional supplier usually can’t.

“SMEs often don’t have the same financial buffers or procurement flexibility as larger corporates,” says Booth. “A sudden increase in transport or import costs can force difficult decisions around pricing, stock orders, payment timing, or even whether expansion plans remain viable.”

When unpredictability is the real cost

The deeper issue isn’t the size of any single increase, it’s that fuel, currency and payment costs move independently, for different reasons, on different timelines, making forecasting genuinely difficult.

Take an importer bringing in components from a regional supplier. By the time a shipment lands, the rand may have weakened, diesel may cost more for the final transport leg, and the payment itself may carry a wide FX spread. The result: a shrunken margin, even though the business changed nothing about its own pricing.

“As economic pressure becomes more persistent, businesses are having to think far more carefully about operational resilience,” says Booth. “That includes everything from when they pay suppliers to how they manage foreign currency exposure and forecast future costs.”

The AfCFTA angle: a barrier before the opportunity

This squeeze matters even more for SMEs eyeing expansion into Africa under the African Continental Free Trade Area (AfCFTA). The agreement lowers tariffs, but tariffs are only one part of the cost of trading across borders.

Logistics costs and cross-border payment friction are already known barriers to African intra-continental trade, and they don’t disappear when a tariff line drops to zero. For an SME weighing regional expansion, the same triple squeeze determines whether that move is commercially viable.

“What this is exposing is how interconnected local businesses are with global trade and financial systems,” says Booth. “The challenge facing SMEs is no longer simply managing higher costs but adapting to an operating environment where global pressures are playing a far greater role in shaping local business decisions.”

What this means for SMEs right now

• Treat fuel price announcements as a forex story, not just a transport story
• Build a wider cost buffer into quotes on import-dependent goods
• Review when and how supplier payments are made to help manage exposure
• Factor logistics and payment costs into AfCFTA expansion plans from the outset