Looming fuel price hike heralds food cost increases

Economists and industry experts have warned South Africans to brace themselves for a significant impact on consumer costs as petrol and diesel prices soar to new heights.

This week, motorists will have to fork out an extra R1.20 per litre for petrol, while the price of diesel is set to increase by R1.18 per litre, according to the Automobile Association (AA).

READ: Motorists told to brace for steep fuel price increase in March

Reprieve as levies remain the same

AA spokesperson Layton Beard said the main driver behind the increases was higher international product prices, in addition to the higher average rand-dollar exchange rate.

“While the weaker rand is contributing a small margin to the under-recovery and increase to prices expected, the overall picture still looks bleak and consumers will feel the pinch,” he added.

“There is some good news for consumers though: the two main levies on fuel – the General Fuel Levy, and the Road Accident Fund levy – will not be increasing for the third consecutive year.

“These levies are traditionally increased in February and implemented in April, but the minister of finance heeded calls by the AA and in his February budget speech indicated that this will not happen again this
year,” Beard said.

“Although not a saving as such, any increases would have added additional pressure to fuel prices, and we again welcome his decision not to increase these rates for 2024.”

According to data from the Central Energy Fund, between 80%-88% of the expected price hikes were attributed to soaring international oil prices, with the remaining impact stemming from the weakened rand against the dollar.

Staple food price hikes

In a domino effect felt across markets, the surge in fuel prices will definitely reverberate through the food industry, causing a possible significant hike in the prices of essential goods according to experts.

“The rise in fuel prices will directly impact transportation costs, leading to higher expenses
for shipping and distribution of food products,” economist Ayanda Mnisi said.

“As a result, grocery stores and supermarkets are passing on these additional costs to consumers, with notable increases seen in a wide range of food items.

Consumers will feel the pinch at the checkout counter as the prices of staples such as grains, meats, dairy products, and fresh produce will continue to see notable upticks.

“The cost of transporting goods from farms to markets will also likely surge, prompting farmers and distributors to adjust their pricing strategies to offset the increased expenses.”

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Economic ramifications

Mnisi said in addition to transport costs, the rise in fuel prices has also influenced the prices of fertilisers, pesticides, and other agricultural inputs, further contributing to the overall increase in food prices.

“This has implications for farmers grappling with higher production costs.”

She noted that the impact of rising food prices was particularly concerning for low-income households and vulnerable communities.

“With food inflation outpacing wage growth, many families are finding it increasingly challenging to afford nutritious meals, exacerbating food insecurity and poverty.”

More experts warned that if fuel prices continue to climb, the upward pressure on food prices was likely to persist, potentially leading to broader economic ramifications.

Trucking Association’s Sibusiso Ndlovu said businesses across the food supply chain were closely monitoring the situation and implementing strategies to mitigate the impact of rising costs, but the full extent of the fallout remained uncertain.

“Consumers are bracing themselves for a period of heightened food price volatility,” Ndlovu said.

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