Cyril Ramaphosa | Fuel levy can't remain suspended indefinitely but there are other things we can do

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President Cyril Ramaphosa. Photo: GCIS
President Cyril Ramaphosa. Photo: GCIS

Cost of living increases, particularly the price of fuel, are the consequence of events over which we have little control, writes Cyril Ramaphosa.

Dear Fellow South African,

Over the past few months, South African consumers have been hit by steep price increases that have dramatically affected their quality of life. It has become increasingly more expensive to buy food and other essentials, to pay for basic services and to use public or private transportation.

While these rising costs affect everyone, low-income households are feeling them the most.

The latest Consumer Price Index for April 2022 published by Stats SA shows there has been little respite for hard-pressed South Africans. Food inflation was recorded at 6.2 percent.

The most basic foodstuffs cost more compared to what they cost a year ago, with staples such as cooking oil recording the highest increases. The price of fuel, which affects the price of almost everything else, has risen by a third in the twelve months to March 2022. South Africa is not alone in this regard.

READ | IN-DEPTH: The big money squeeze on South Africans: Why it's getting hard to survive

A recently published poll for the World Economic Forum shows that nearly a quarter of people globally, including those in developed economies, are struggling financially due to rising prices.

These increases, particularly the price of fuel, are the consequence of events over which we have little control. The ongoing conflict between Russia and Ukraine has had a significant impact on the price of fuel and food. Both countries are major exporters to international markets of fertilisers, grains and oilseeds that are needed for a range of items, such as cooking oil.

Another factor is lower agricultural output due to extreme weather events caused by climate change, such as flooding and droughts. While many of these events are beyond our control, government is doing what it can to shield South Africans from current and future price increases.

One of our greatest advantages as a country is a strong, independent Reserve Bank that has managed to keep inflation within a narrow target range, well below what many other countries are experiencing.

READ | Mbhazima Shilowa: Blistering high fuel prices, broken transport system - Govt is failing our people

Last week, we announced that the fuel levy would be suspended for another two months to August, which will bring some relief to households. The suspension of the levy has provided essential relief to South Africans since it began in April.

Significant cost to public finances 

Since the suspension of the levy comes at a significant cost to public finances, which affects other programmes of government, it will be difficult to continue this indefinitely. There are, however, other things we can do. Improving our nation's food security is vital to withstanding this and future shocks.

We have a strong agricultural sector that continues to grow and create jobs. To further increase agricultural production and strengthen our food sovereignty, we are investing heavily in improving local capacity, supporting commercial and small-scale farmers alike and helping more people to grow their own food. Through the Presidential Employment Stimulus, input vouchers have been given to over 65 000 smallholder farmers, and work is under way to reach 250 000 such farmers.

Government is also providing subsistence farmers with fertilisers and equipment to produce food, and helping groups or individuals to start their own food gardens. In provinces like the North West, small-scale farmers are supported with agricultural "starter packs" of seedlings and poultry, in partnership with local agricultural colleges.

Through the Pro-Active Land Acquisition Strategy and the release of state-owned land for agriculture, we are supporting more small-scale farmers to expand their businesses and make them commercially successful. We are also focusing on establishing more public-private partnerships to support the expansion of black commercial farming through initiatives, like the Partners in Agri Land Solutions and the Agricultural Development Agency.

READ | Lumkile Mondi: The burden is firmly on SA households in 2022

To enhance biosecurity and safeguard animal health against diseases, like foot-and-mouth disease, we are strengthening our animal movement control measures and vaccine production capabilities. In addition to boosting local food production, our extensive social grants system and zero-rating of basic goods helps to protect the poor from rising costs. Through free basic services, like water and electricity for indigent households, we can ensure that no family goes without basic services.

To get through this difficult period, all of society should get involved. For our part, government will continue to monitor the situation closely and will do everything within its power to protect South Africans from unsustainable increases in the cost of living. Corporate South Africa should ensure that consumers do not pay more for food than they have to. We welcome the indications from food manufacturers and retailers that they are putting measures in place to help consumers get more for their money.

Fresh produce inquiry

In March this year, the Competition Commission released for public comment the terms of reference for a market enquiry into the fresh produce market. It noted that the cost of fresh produce has been increasing at above-inflation levels, and that this has had a disproportionate effect on the poor. The inquiry will examine if there are any distortions in the value chain that make food more expensive.

We will use our competition policy to protect consumers against unjustifiable price increases and anticompetitive practices by businesses, as we did during the Covid-19 pandemic. The ongoing process of structural reform of our economy will support these efforts. Reforms in the energy, transport and telecommunications sectors aim to reduce the cost of electricity, logistics and data in the long term, through greater competition and efficiency. We should be paying less, not more, for these services in the future.

Though oil prices and extreme weather are events over which we have little control, there is still much we can do as government, business, labour and communities to help the people of South Africa through this difficult time.

With best regards.

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