As of today 95-octane unleaded petrol will cost motorists R2.33 a litre extra, and R2.43 a litre extra for 93-octane unleaded petrol. This is some relief from the estimated increase of R4 per litre, thanks to an extension of the temporary reduction of R1.50 in the general fuel levy by treasury. Diesel costs up to R1.10 more per litre.
According to Agri SA, an increase without Government’s softening the blow would have had serious knock-on effects for food security in South Africa. It was vital that government therefore consider all viable options to buffer the cost pressures that impact food prices. They believe that a targeted intervention to increase the diesel rebate to the agricultural sector served this purpose, while also being a more sustainable option.
Kulani Siweya, chief economist at Agri SA said that the consequences of rising fuel prices had already been felt in the agricultural sector. He said fuel was one of several input costs that have been rising sharply, placing significant pressure on a number of agricultural commodity sectors.
“Whilst farmers have little control over food prices beyond the farm gate, increasing input prices have already been felt by consumers who are facing the result of these cost pressures, higher food prices, at the till,” he said.
Relief to farmers he believed is a matter of urgency because of the high demand for fuel in many parts of the sector as it is still harvesting season for a number of commodities including summer grains and fruits like citrus.
Winter crops, including wheat, are also currently being planted. Agri SA believes that this made these commodities sensitive to the current increase and highlights the need for a targeted and sustainable intervention that can help mute food price increases in coming months.
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A way to buffer food price from fuel hike
The agricultural sector receives little-to-no direct support from the government relative to our international competitors, Siweya pointed out.
“One of the welcome measures in place is the diesel rebate which is designed to benefit local industries by protecting against international competition (where primary producers enjoy significant subsidy and other government support). The rebate works by offering relief from the Road Accident Fund (RAF) levy and the fuel levy and is currently industry dependent.”
He explained that in the agricultural sector, a certain percentage of producers’ fuel qualifies for this diesel rebate, and of that portion 100% is exempt from the RAF levy, and 40% from the fuel levy.
“This tool is very well placed to help cushion the sector from increasing fuel costs This could be achieved by either increasing the percentage of producer fuel which qualifies for both the RAF and fuel levy and/or increasing the percentage of relief from the fuel levy.”
Agri SA believes that an intervention such as this would be both targeted and strategic, as one of the biggest negative externalities of fuel price increases is their impact on the price of food and food security in general. Cushioning the increase in this manner would go a long way in ensuring farmers remain viable and help feed the nation, the agricultural organisation said.
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