Fuel price hike will hit farmers, consumers hard, expert warns

06 March 2019 | Web Article Number: ME201913845

Agriculture & Sugar
Commerce & Trade

THE increase in the price of petrol at 74 cents a litre and diesel around 91 cents a litre, will have a severe impact on the cash flow of farmers.

That’s according to Dawie Maree, Head of Information and Marketing at FNB Agribusiness, who said that fuel and diesel were commonly used for tillage, harvesting, machinery and transportation, making them a critical component for both small-scale and commercial farmers, as well as the entire agricultural value chain.

“From a farm producer level, we are currently experiencing a late season whereby farmers are still using a lot of diesel. This follows the Budget Speech announcement that the fuel levy will increase by 30c/litre for diesel from 1 April 2019, which adds to the woes of producers.

“Furthermore, given that 70% of South Africa’s food is transported by road, the increase in the diesel price will have a negative impact on food inflation, and the disposable income of consumers who are already struggling to make ends meet,” Maree said.

The South African Chamber of Commerce and Industry (SACCI) voiced similar concerns. CEO Alan Mukoki said the chamber was concerned that fuel price increases would lead to inflationary pressures on the economy, potential interest rate increases and a further difficult environment for economic growth.

He said SACCI acknowledged that global oil prices and the adverse rand-dollar exchange rate were mainly responsible for this price increase. “Another fuel price increase is expected from the beginning of April due to tax hikes that come into effect, as announced by the Minister of Finance in his 2019 Budget Speech.”

The chamber also acknowledged the government’s efforts to reduce the sharpness of this negative impact by implementing the price increase in stages, with the first 20 cents coming into effect from the beginning of April 2019, and the remaining nine cents a litre for petrol and 10 cents a litre for diesel coming into effect in June 2019.

“However, taken over a period the effect will still be negative. We urge government to make every endeavour to trim unnecessary, wasteful and reckless expenditure with an idea to reduce the various levies on the price of fuel.

“This cost of energy input is already overtaxed. An economy whose energy input costs keep rising and are not commensurate with economic growth and job creation is bound to hit turbulence,” Mukoki said.

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