Industry organisations the Motor Industry Staff Association (Misa) and Agri SA have strongly urged that government suspend fuel levies to relieve pressure on food and fuel prices, when it reviews the pricing methodology for petrol.

Particularly, Misa asked to be included in the review process and for it to be expedited.

Although Finance Minister Enoch Godongwana announced in the 2022 Budget that there would be no increase in the fuel or Road Accident Fund levies for this year, about 36% of the retail price of fuel still goes to the fiscus.

Misa is concerned about the turmoil and rapid escalation in the price of crude oil and gas after US President Joe Biden announced a ban on all imports of oil and gas from Russia. European countries are also planning to phase out imports of oil and gas from Russia.

Various governments and businesses have put pressure on Russian President Vladimir Putin to end the war in Ukraine.

The Central Energy Fund has predicted another record-high fuel price hike in April, echoing the views of economists that the fuel price may soon hit R40/ℓ.

Such a hike will have a devastating impact on Misa’s 53 000 members who are dependent on motor vehicle and component sales, and vehicles services and repair work.

The association believes increases in the fuel price have a direct impact on the cost of living of each South African household. More than that, Misa says, the situation is killing any hope of addressing the unemployment rate and alleviating poverty in South Africa.

United Nations Conference on Trade and Development secretary-general Rebeca Grynspan agrees, stating that developing countries are already hard hit by the Covid-19 pandemic, rising debt and climate change, and now have to suffer disruptions in food, fuel and finance.

She laments that soaring food and fuel prices will affect the most vulnerable in developing countries, putting pressure on the poorest households, which spend the lion’s share of their income on food.

“Countries, already under severe pressure owing to the costs of the pandemic, will see disruption in trade, deficits widen and investment contract.

“Additionally, significant increases in oil and gas prices can shift investment back into fossil-fuel-based energy generation, which risks reversing the trend towards renewables at a time of acute climate crisis,” Grynspan warns.

FOOD SECURITY

Agri SA says the Ukraine crisis will have a serious impact on South Africa’s food security and poses real risks to parts of the agricultural sector.

With global wheat prices and agricultural input costs skyrocketing, the organisation has implored government to take urgent action and suspend the fuel levies to provide relief for farmers, especially small-scale farmers, and contain food prices for South African consumers.

South Africa’s trade with Ukraine has increased substantially over the last decade. Between 2016 and 2020, South Africa’s agricultural exports to Ukraine more than doubled from R76.5-million in 2016 to R155-million in 2020.

Agricultural imports from Ukraine have remained relatively stable, sitting at R390-million in 2020.

Ukraine and Russia are both major producers of wheat on the global market, accounting for a quarter of global wheat exports, and the disruption to the supply of this staple food will cause food price shocks globally, particularly in South Africa, given that it imports 30% of its total wheat from these nations.

Moreover, Russia is the leading supplier of fertiliser globally.

Agri SA says global fertiliser prices had already risen substantially between January 2021 and January this year. Local fertiliser prices doubled, while global prices quadrupled.

Farmers were, therefore, already under pressure prior to the current crisis. Russia’s invasion of Ukraine has only worsened this pressure.

Brent crude oil prices have also almost tripled between February and March. With the recent and still expected fuel price increases, the cost of taking food to South African consumers will rise substantially in the coming months unless government acts to contain them.

“Failure to act can only exacerbate the pricing pressure on consumers, compromising food security in South Africa, especially for the most vulnerable in society.

“In addition to consumers, the suspension of the fuel levies will also buttress vulnerable small-scale farmers from the increases in input costs and from the expected hit to agricultural revenue from Ukraine and Russia,” Agri SA explains.

Agricultural commodities make up more than half of all South African exports to Ukraine, the biggest of these being fruits and nuts. Parts of the sector are, therefore, likely to see a significant impact on their performance in the first quarter of this year.

Citrus, in particular, accounts for the majority of exports to Ukraine and was valued at an estimated R133-million in 2020.

Blockages of exports to Russia will also knock South Africa’s significant trade in agricultural commodities with that country. South Africa’s agricultural exports to Russia are more than double that of agricultural imports. Agricultural imports remained stable at about R2-billion from 2016 to 2020, while exports grew from R2.1-billion in 2016 to R4-billion in 2020.

“The Ukraine/Russia conflict will, therefore, have substantial consequences for South Africa’s agricultural sector performance and government must take action to mitigate the devastating impact of this lost revenue on the nation’s farmers by assisting with measures such as opening up market access so that products destined for Ukraine can be redirected.

“Every day this action is delayed puts much needed jobs in the sector at risk,” Agri SA concludes.