How South Africa’s diesel price hike will affect food and transport costs

As South Africa faces a significant diesel price hike, experts warn of impending increases in food and transport costs, putting additional strain on households and businesses already grappling with economic challenges. South Africans may be paying less for petrol from today, but the sharp increase in diesel prices is expected to push up the cost of transporting goods, food and other essentials within weeks, business leaders and consumer advocates have warned. The regulated wholesale price of 0.05% sulphurdiesel increasedby R1.38 a litre, while 0.005% sulphur diesel rose by R1.23 a litre from today.

The increase comes despite a 52-cent-a-litre cut in petrol prices, aided by a reduction in the slate levy. Industry groups say the diesel increase is likely to offset much of the relief from the petrol price cut because South Africa’s freight, agriculture and logistics sectors rely heavily on diesel. Road Freight Association (RFA)chief executive Gavin Kelly said the increase would immediately raise costs across the transport industry.

“Diesel typically accounts for between 30% and 50% of a road freight operator’s total operating costs, so an increase of this magnitude has an immediate and disproportionate effect on the sector compared to other industries.” Kelly said many operators, particularly smaller transport businesses and owner-drivers, had little room left to absorb the higher diesel costs. He explained that while larger companies with fuel escalation clauses in their contracts would recover the additional costs through fuel surcharges, many smaller operators would have to either absorb the added expense temporarily or raise their prices immediately. “The Association estimates the bulk of this increase will be quickly passed through the supply chain.

[paywall]

Some consumers will see immediate transport price increases, whilst consumers can expect a softer creep in consumer items over the next 30 to 60 days. Prices will, however, increase, and the consumer will feel these.” He said that because more than 80% of South Africa’s goods are transported by road, food, fast-moving consumer goods, agricultural products and building materials would be among the first sectors to feel the impact. “Consumers are likely to feel this at the till within weeks rather than months.”

[/paywall]