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Fuel price hike: Consumers brace for higher food, transport costs

| Economic factors

Consumers will be faced with higher travelling costs and the possibility of food price inflation as a result of the fuel price hikes which came into effect at midnight on Tuesday, economists have warned.

The inland price for a litre of 95 octane unleaded petrol will cost R16.02 from 3rd July 2018. The coastal price will be R15.43, according to the Department of Energy.

Paul Makube, a senior agricultural economist at FNB AgriBusiness, noted that while inflation was expected to remain within the SA Reserve Bank’s targeted band of 3% to 6%, consumers will be facing higher costs for travelling and transporting goods.

"Particularly [hard] hit will be the poorest households, who spend a large portion of their income on transport," says Makube.

The cost of producing and transporting agricultural crops will also come under pressure, as 80% of grain is transported by road.

"These costs will eventually be passed on to the consumer up the value chain, as businesses struggle to absorb the added costs.

"Grain is currently harvested and heading for the silos. This becomes an added cost, although some producers purchase diesel in advance," he explains.

Apart from increasing travel costs for grain transportation, higher crude oil prices impact costs of fertiliser, pesticides and herbicides needed for crop farming, said Makube.

PwC economist Christie Viljoen said higher fuel prices would increase the cost of production and delivery to retailers.

Costs would have to be recovered from buyers via higher food prices, he said.

Debt burden

The fuel hikes will add pressure to already indebted consumers, warned Neil Roets, the CEO of Debt Rescue.

"There is not a glimmer of hope that the massive unemployment situation is going to resolve itself anytime soon, nor that the growing national debt is going to come down," he says.

"More than half of consumers are three months or more in arrears with their repayments, and this figure is expected to keep climbing steadily as South Africans are getting deeper and deeper into debt," Roets argues.

To mitigate the impact of the fuel price hike, Minister of Energy Jeff Radebe, in a written reply to a question about the petrol price hikes issued by Parliament on Tuesday, encouraged motorists to avoid unnecessary journeys, make use of car pooling and practice "economical driving techniques".




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