Nearly a week after the implementation of a massive petrol and diesel price hike, agriculturists from many different industries are concerned that it may be the straw that breaks the camel’s back.
“The fuel hike adds salt to an already bleeding wound,” says Nondumiso Pikashe, agripreneur and founder of Ses’fikile Wines in the Cape Winelands.
Following the latest price hike, a litre of petrol now costs R17.32 in Gauteng and other inland provinces. On the coast, it costs R16.64 per litre. The price of diesel in Gauteng now stands at R14.77.
The Gugulethu-born Pikashe tells Food For Mzansi that the price increase puts her business at risk. “Ses’fikile Wines has serious limitations to market access. So, we are dependent on meeting the customer halfway by delivering to their doorsteps.”
Practically speaking, this means that Ses’fikile Wines outsources the movement of its wines from point A to B, whether it’s exported overseas or local. This implies price increases in their products in a distressed economy, Pikashe says.
“Customers hold a view that there is an oversupply of wine (following the Covid-19-induced sales bans) and therefore expect lower prices. I don’t want to mention the fact that we are still in a Covid-19 wave, and the impact it has.
“As a single woman, parent, and business owner, the impact of the fuel price increase is tripled with domestic responsibilities that I cannot run away from,” she adds.
Other industries are also feeling the pinch
“The fuel increase has a negative impact on farmers as the cost of preparing the soil has gone up,” says Eric Mauwane, managing director of Oneo Farms in Gauteng. “The price of seedlings have gone up because they [suppliers] have built in the fuel increase into the costs of seeds and seedlings.”
Mauwane also confirms that transporting produce from his farm to customers and markets are now costing an arm and a leg. “Farmers are battling to cope with these higher costs and there isn’t any relief at all.”
Furthermore, Byron Booysen from Booysen Tunnel Farming in Kraaifontein in the Western Cape says he is feeling the impact of the fuel price hike in fertiliser costs.
As a small-scale hydroponic farmer, Booysen says he will be severely impacted if he does not have a very high yield to safeguard his profitability.
“This will obviously have an end-result of the customer paying higher prices for produce. And also, maybe fewer suppliers will survive in this game since fertiliser might just become too expensive.”
Booysen fears that some producers won’t survive at all because of high production costs. This will lead to a lower demand, creating an area of over production where farmers have crops that will not be sold at the price they need to cover their input costs.
“We hope that there will be some relief in terms of support for farmers,” he says.
Meanwhile Agri SA confirms that farmers across the country are suffering.
“I should probably lead with a ‘reader discretion’ warning before dishing out figures,” jokes Kulani Siweya, agricultural economist at Agri SA, when asked on his opinion on the recent fuel increase.
He says while we’re only in month four of 2021, petrol prices have already (cumulatively) jumped by close to R3.00 for petrol (R2.86 and R2.84 for 95 octane and 93 octane, respectively) and by R2.32 for diesel.
“The main drivers for the increase has been international petrol costs, as well as weaker domestic currency against the US dollar,” he explains.
According to Siweya the movement in prices are typically affected by two main factors: international petroleum costs, and the movement in the rand/dollar exchange rate. However, in April the hikes in fuel levies are also in effect.
For April, the situation is further exacerbated by a few factors, Siweya explains. This includes the increase in the general fuel and road accident fund levies as announced in finance minister Tito Mboweni’s budget speech in February. The recent six-day blockage of the Suez Canal restricted the movement of cargo worldwide, and made oil a precious commodity due to supply constraints during the period.
The Autombile Association (AA) has released a statement that says government can no longer ignore the knock-on effects of severe fuel price rises.
“The cost is not only direct, but throughout the value chain, and is battering consumers from all sides. It requires urgent review to help ease pressure on consumers who are battling to stay financially afloat.
“We can only stress, again, the severe additional damage these increases will do to household budgets, both directly and indirectly as the increased transport costs ripple throughout the value chain. Increased public transport fares will surely also not be far off either.”
This is echoed by Siweya, who adds that farmers are also still coming to terms with the news that electricity tariffs will be increased by nearly 16%.
“Farmers are busy preparing the soil for winter crops now,” says agricultural economist Lunathi Hlakanyane. “At this time there is a higher than normal consumption of fuel, so with the increased fuel prices we are likely to see double in production costs and a parallel decline in profitability.”
Due to this, Mzansi farmers will see higher prices for winter-grown agricultural commodities. Hlakanyane warns that this is likely to trickle over to summer crops as well.
“The combined rise of fuel and electricity is going to have a detrimental impact on industries that are energy-intensive, such as poultry farming,” warns Hlakanyane. “We can also expect to see a harmful increase on the average food basket prices before the third quarter of the year.”
Photo: Supplied/Food for Mzansi