[ad_1]
South Africa’s farmers are reeling this week after diesel prices were hiked by a massive R2.80 per litre, which, amid high stages of load shedding, are knocking operations all along the supply chain.
The bad news for South African consumers is that these costs will reflect in higher shelf prices in the coming months.
According to AgriSA chief executive officer Christo van der Rheede, while rising fuel prices and high stages of load shedding impact everyone in the country, farmers bear the brunt of rising costs.
“The agriculture sector really has been on the receiving end of these increases. We saw a massive spike in the price of diesel last year, up to R26 a litre, now it’s going (back) up over R23 a litre. Farmers are facing an uphill battle,” he said.
Prospects for the months ahead also look increasingly bleak. The latest data from the CEF shows that further hikes may be on the way, with an under-recovery of R2.50 already on the books after the first week of September.
Not only do farmers have to spend huge amounts on diesel to keep their businesses running as a normal course of business, but when load shedding hits – especially during stage 6 – these costs increase exponentially.
When stage 6 load shedding hits, all parts of the value chain take a hit. Farmers are the first in line, with all input costs escalating. This then feeds onto the processing facilities, storage facilities, logistics and transport, distribution centres and retail centres.
Room to absorb all these costs has diminished, and it will ultimately be consumers who have to pay higher prices.
According to Van der Rheede, the load shedding/diesel price double-blow is exacerbating other excess cost factors.
The price of electricity went up 2023 by between 15% and 19%; farms and other related businesses have had to install solar and other installations to try and mitigate load shedding; and criminal activity has increased, where infrastructure is being damaged or stolen.
All of these added costs will eventually factor into the price of food and goods consumers see in shops.
There is some relief for the sector, the Agri boss said, in the form of the government’s diesel rebate system. However, while this does have a positive impact on the cost of doing business, Van de Rheede said it is not enough to counter the barrage of price pressures.
He said that the agricultural sector has approached the government to review the rebate and possibly consider increasing it, adding that talks with the relevant departments have been positive.
“It is very difficult for the government to, at this point in time, do away with the levies because they factor them into their budgeting process – but I think consideration should be given to either increasing the rebate or doing away with the levies,” he said.
The government is also developing an agri-loan facility, which should help smaller businesses better navigate these issues, he said.
However, he stressed that the agricultural sector is now at the point where it has been rendered unprofitable and uncompetitive in the global market.
“We are at the point where we cannot compete with Namibia, where the diesel price is far less than South Africa. It’s going to have a negative impact on food inflation and the price of products,” he said.
Read: Alarm bells for petrol prices in October
[ad_2]
Source link