Business 4.9.2018 02:10 pm

Fuel price hike to hit agriculture sector hardest – economist

The expert says the cost of producing and transporting agricultural commodities continues to erode profit margins as close to 80% of grain is transported by road.

Senior agricultural economist at FNB Agri-Business Paul Makube said on Tuesday that the latest fuel price hike of 4.9 cents per litre will hit the agriculture sector the hardest and the costs are likely to be gradually passed on to the consumer up the value chain.

The department of energy on Monday decided to limit the fuel increase to only five cents per litre to cover the costs of wage increases for frontline staff at garages, including petrol attendants, cashiers and other admin staff.

Makube said: “At current levels, the cost of producing and transporting agricultural commodities continues to erode profit margins, as close to 80% of grain is transported by road. These costs will gradually be passed on to the consumer up the value chain as businesses struggle to absorb the added costs.

“This is not good news for the agriculture sector as we head into the new crop season.”

The adjustment means the price per litre of 95-octane petrol will go up on Wednesday from R15.44 to R15.49 at the coast and from R16.03 to R16.08 in Gauteng province.

Earlier projections indicated that the fuel price should have increased by over 20 cents per litre, meaning the government has absorbed the bulk of the increase.

Makube said this was a welcome relief for consumers whose disposable income has been under pressure from consecutive hikes in the past few months, pushing inflation higher although still within the Reserve Bank’s tolerable range of three to six percent.

He said the poorest households who spend a large portion of their income on transport, however, remain under strain as travelling costs remain high at current levels.

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