Fuel price hike will slash grocery list

2011-04-09 15:37

This week’s petrol price ­increase will hit consumers where it hurts the most.

The effects of the 54c/litre price hike on pockets will be felt immediately, because food and transport costs will go up at the same time.

According to the Consumer Goods Council of South Africa (CGCSA), many food products are imported and transport is vital in getting them to their destinations.

Moshisi Lehlongwane, business and research analyst for the CGCSA, says over 90% of all foodstuffs are transported around the country by road.

Small businesses and consumers will be hit the hardest, he says.

“Most of our spaza shop owners do not have their own transport; they rely on rental transport, unlike the big retailers who also own trucks.”

He adds that many consumers rely on taxis and buses for transport, and fares will go up as a result.

The good news is that the inflation rate is stable, although political turmoil in the Middle East and in North African countries could push it up.

Chief economist for Eskom Treasury Mandla Maleka says what is happening in these countries could disrupt crude oil production and thereby increase the price of crude oil.

Subsequently, he says, the domestic fuel price will increase and when that happens the ­Reserve Bank may change its monetary policy and increase the inflation rate.

Maleka says a stronger rand and weaker crude oil prices could lower petrol prices.

However, the current weaker rand and higher crude oil prices have the potential to hike ­domestic fuel prices even more, he says.

He adds that South Africa cannot meet the domestic demand for oil and is forced to import most of its crude oil, which is priced in US dollars.

The price of crude oil surged from around $90 (about R600) a barrel in January to $114 a barrel in April, he says.

The increase in crude oil prices makes it expensive for refiners because their biggest input cost is the crude oil.

“It makes sense for them to increase their prices; hence the increase in domestic petrol prices. The increase will have a multiple impact on the economy. Transport costs will increase as well as the consumer inflation basket,” says Maleka.

Transport economist Tony Twine says the Transnet pipeline and levy contributions are part of the fuel price adjustment and influence it.

“They are both explicit in the adjustment announcement,” says Twine.

Pick n Pay says it has seen small price increases from its suppliers as a result of rising ­fuel costs.

The retailer cautions, however, that due to an increase in the price of sugar it expects the increases to rise further soon as sugar is an ingredient in a number of products.

Spokesperson Florence de Vries says the retailer is still ­operating in a deflationary ­environment and that its year-on-year food inflation is still below the 2.5% mark.

She says the store will always try to absorb as much of the costs as possible by running the business more efficiently and looking for opportunities to cut costs.

“We have a team of dedicated professional buyers around the country,” says De Vries.

“They will do everything in their power to negotiate the best possible prices and we will remain competitive at all times.”

Woolworths spokesperson ­Zyda Rylands says the company is working with its suppliers to understand the potential effect of the cost of fuel on the prices of their food.

She says it is still premature to speculate on the exact impact the petrol price increase will have on food prices at Woolworths.

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