South Africans grappling with record-high fuel prices are getting a bit of relief this month. That goes for Mzansi’s farmers and food transporters, too. As of Wednesday, 5 January 2022 all grades of fuel became between 67c and 71c per litre cheaper.
As announced by minister Gwede Mantashe’s department of mineral resources and energy on Monday, the retail price of 93 octane petrol is now 71c a litre cheaper than in December last year, while 95 octane petrol costs 68c less. The wholesale price of diesel (0.05% sulphur) is 67.8c a litre lower and that of 0.005% sulphur diesel is 69.8c down.
Grateful for some relief
Farmers and food transporters alike tell Food For Mzansi that they are grateful for the break.
Fruit and vegetable exporter Uzair Essack, managing director of Riyp, says he is most relieved by the petrol and diesel price drop as transporting his goods from point A to point B will come at a much lower cost to him.
“At the moment we are dealing with mangoes that are coming all the way from Hoedspruit [in Limpopo], which is quite far from the nearest port. The fact that we have a reduction in the petrol price means that my transport costs will be less.”
December’s first-time petrol price of over R20 per litre in parts of the country, was a serious blow to his business.
“I didn’t ever think that it would be over R20 a litre so quickly. To pay a premium on the transport from farms which were in outlying areas such as Hoedspruit and Komatipoort in Mpumalanga was quite a shock.
“It caused an exponential increase in the transport rate, which means I made close to no money on certain deals.”Riyp managing director Uzair Essack
Moreover, when Riyp did its re-costing to determine a price at which goods should be sold to make a profit despite the December price hike, its export products were no longer as attractive to his customers on the international market.
Now his goods could potentially sell with a much lower price tag, making it a bit more palatable to the customer base in all the countries to which Riyp exports.
December price hike felt in January
KwaZulu-Natal farmer and agricultural consultant Andile Ngcobo says he, too, is encouraged. “If [the fuel price] had to go up from where it is now, I don’t think any business – farming, logistics or any other – would be making any money, with profit margins already being so tight. It would almost be impossible to operate.”
Farming has been quite expensive in December, Ngcobo says. “Diesel and labour are by far the highest costs in any farming operation, before anything else. With the price coming down, it means that we’ll hopefully be generating more money.”
Ngcobo says although he has not finished accounting on his December expenses, he can already tell that a significant amount of what he spent was on fuel.
“We’ll feel the effects of that expenditure this month. I [will] consolidate my figures, [but] I can already tell that I am working with a very tight budget due to so much being spent on fuel.”
Off the cuff, Ngcobo reckons he spent about 30% more on fuel in December when compared to his average budget allocation for fuel in other months.
AA asks for review of fuel price structure
Even though the fuel price drop has been widely welcomed by the agricultural community, many are unconvinced that relentless price hikes are a thing of the past, and calls have been made to government to communicate a better way forward.
But at this stage it is impossible to predict whether reduced fuel prices will carry over into coming months, says Layton Beard, spokesperson for the Automobile Association (AA).
International oil prices as well as the dollar-rand exchange rate are the two big drivers of local fuel prices. These drivers, he explains, fluctuate daily and affect the price of fuel. “it’s impossible to say whether it will go up or down in February and onwards,” Beard says.
The AA has lobbied for a review of the fuel price structure as current prices are far in excess of what South Africans were paying just a few months ago. The association also wants an audit of the existing prices within that structure.
“We want the minister to review it immediately. Hopefully, when he gives his budget vote speech… in February, he’ll give some indication of what it is going to happen with the fuel price,” Beard says.
Apart from him not increasing the existing levies on fuel at all during that speech, the AA would also like to see the minister announce a way forward on fuel prices in South Africa.
Spillover to retail food prices
Food For Mzansi journalist Tiisetso Manoko reports that Gavin Kelly, CEO of the Road Freight Association, says the fuel price, which has increased sharply three times towards the latter half of 2021, drove up transport costs, and any decrease in fuel prices will have a knock-on effect on operational costs and ultimately on prices consumers will pay.
“It must be understood that there will not be an immediate reduction of prices at retail stores as those goods that were transported at higher fuel prices would still have to filter through the various depots and retail points.”
‘Other input costs the bigger concern’
For Gauteng farmer Mbali Nwoko the fuel price drop means very little.
“Even with the petrol prices dropping, [food] prices will remain high because it’s not as if the prices of inputs will also drop tomorrow.
“We all have had to make means [to] survive. Myself, I am not immune to the prices, so it obviously impacts cash flow on a monthly basis.”
Nwoko says that a drop in input prices would have had her more excited.
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