Durban - Farming associations, economists and a civil society group that tracks food prices believe that this month’s hefty diesel price hike could lead to an increase in the prices of basic goods.
Last week, both grades of petrol increased by 37 cents per litre, while diesel rose by between 71c (50ppm) and 72c (500ppm).
Mervyn Abrahams, programme co-ordinator of the Pietermaritzburg Economic, Justice and Dignity Group said that the price increase for diesel was concerning as the diesel price and food prices were linked.
“Most operations on farms require diesel and transporting of basic vegetables is done by trucks and any increase in the price of diesel affects both the farmers and road freight sector and any increases will be passed onto the consumer with higher food prices.”
Abrahams said that due to trucks paying more to transport food there would be an increase in the price of basic foods.
“We can expect to see increases in the price of basic vegetables and fruits and the price of bread and maize due to long distances that trucks travel.”
Jaco Minaar, Agri SA president, said that the latest increase in diesel prices were concerning for farmers and the value chain.
“This will again put pressure on the value chain to absorb these increases and it might have an effect on consumer prices because fuel prices directly influence transport cost of products, and to a certain extent production or preserving costs due to fuel being used in generation of energy to keep the process going or the cold chain in place.”
Minaar added it was evident from the gross domestic product that consumers were under enormous pressure.
“We see this clearly in reduced consumption even in staple foods. The constraints in economic growth seriously need attention, and jobs need to be created in order to put the consumer in a better position to absorb such kinds of price increases.”
South African Farmers Development Association (Safda) chairperson Dr Siyabonga Madlala said that any price increase for diesel impacts farmers.
“It increases the input costs for us as most of the operations of farmers involves diesel which includes irrigation. The other issue is that we have to pay more for transporting goods.
“It is difficult for us as farmers as we have been suffering, especially with load shedding and other escalating costs. Unfortunately, this is passed on to the consumer.”
Professor Bonke Dumisa, an independent economic analyst, said as most goods were transported by trucks, a diesel price increase added to the cost of doing business and this would lead to higher food prices.
“We also have seen two consecutive months of the diesel price going up which is not good news, as, if this leads to higher food prices, it will lead to higher food inflation and inevitably higher inflation.”
Dumisa added that recent gains in clawing back inflation could also be lost.
“We made gains with food inflation dropping to around 12% and inflation dropping to below 6% recently, but this could be lost with the diesel price increase. The other problem is when food prices go up they don’t come down easily.”
Professor Irrshad Kaseeram, of the University of Zululand’s Economics Department, said that the diesel price had fallen by R1.30 in June and rose by 12 to 18c in July and a further 72c this month.
“From June, prices are still lower by about 30 to 40c per litre. The spillover to food price increases is expected to remain low for now. Once the gains are fully reversed, then we can expect a significant food price rise.”
Gavin Kelly, CEO of the Road Freight Association, said that road freight transporters used diesel as the main fuel source for their vehicles.
“There are shorter haul/courier vehicles that use petrol as well, so they are not excluded from increasing costs either. While we have seen fuel prices coming off the huge highs in 2021 and 2022 – prices are definitely not where the local economy would like them to be.”
Kelly added that while there has been some relief in the first quarter of the year, the second and now third quarters were showing steady creep upwards in prices.
“Whether we like it or not the continuous increases in the price of fuel inevitably drives the cost of transport and logistics up step by step and with roughly 85% of all goods moved through and around the country having a road leg at some part in the journey, there will be increases to consumers as the cost to transport goods increases.”