Economic recovery is being hindered by fuel price increases and rolling forward the National State of Disaster. This will ultimately result in more suffering for over-burdened consumers.
Government recently announced that it would extend the National State of Disaster by another month to April 2022. This, together with the shock rise in prices and possible rations of fuel, as well as electricity hikes, paints a picture of more pain on the way for our already-battered economy, which will have the greatest impact on the over-burdened consumer.
This is the view of Roelie van Reenen, supply chain executive at Beefmaster Group, a leading specialist producer of quality beef products to South Africa and beyond, who says that urgent action is now required to stimulate job creation.
“We have been living in a State of Disaster for two years, and the time has now come to take drastic steps. In a climate with escalating fuel and food prices, we should be doing more to turnaround the economy. Extending the State of Disaster does not serve this purpose,” says van Reenen.
Furthermore, Treasury released estimates recently that motorists will on average pay R20.28 for a litre of fuel during 2022, with the Department of Mineral Resources and Energy saying that it may soon need to impose fuel rations on South Africans as a result of the ongoing war in Ukraine.
While there have been proposals from role-players for government to suspend the fuel levy to ease this burden, van Reenen believes this is not the answer.
“Our country can’t afford this as a solution. We need more levers we can pull to get our economy going again. For example, we want to see government introduce incentives for companies to produce their own energy, whether renewables or from refined oil. Not only will this help to reduce our reliance on imported fuel, but it will also ensure that there are fewer input costs into food-based products, which will put money back into the pocket of the financially stretched consumer,” says van Reenen.
He explains that input costs, such as rising fuel prices, are factored into the food prices, which means that food will naturally become more expensive as fuel prices increase. “If we can keep fuel prices in check, this will have positive spin offs for the price of food, and consumers,” he explains.
In a recent online poll by Beefmaster Group, 78% of participants said that they are worried that the Russia-Ukraine crisis would impact fuel prices the most, which trumped worries about possible grain price increases (14%).
NERSA also recently approved Eskom’s bid to increase electricity tariffs by 9.61% from the 1st of April 2022, spelling more bad news for consumers and businesses.
“Eskom’s problems are not going to go away overnight, and while alternative energy takes time to get up and running, it costs money, and this is not going to be the silver bullet everyone can pin their hopes on,” says van Reenen.
He urges government to do more to create an enabling environment for consumers, farmers, and businesses in the beef and agricultural sectors.
“An enabling environment is very difficult with the current restrictions in place.”
His comments off the back of President Cyril Ramaphosa having reiterated the importance of the agricultural sector to South Africa’s recovery, at a recent event hosted by the Bonsmara Breeders’ Society.
Van Reenen adds that in pre-pandemic times, agricultural shows and events were an excellent revenue generator and vital promotion platform for the sector, which has fallen away during COVID-19 due to the restrictions in place.
“Our sector needs to be visible on public platforms. Agricultural players all across Africa would attend events like NAMPO, the biggest agricultural show in the Southern hemisphere, and money would be spent there and circulated back into the economy. The current restrictions are making it very difficult to have large-scale events, which is necessary to stimulate and ensure a thriving economy and agricultural sector,” concludes van Reenen.
