In a joint statement, Agri SA and Agricultural Business Chamber of South Africa (Agbiz) on Tuesday said the R3 per litre fuel levy reduction announced by government offers “important and timely relief” amid rising global energy prices.
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South Africa’s agricultural sector has cautiously welcomed government’s decision to temporarily reduce the general fuel levy, but industry players warn that steep diesel price hikes will still place significant pressure on farmers and food prices in the months ahead.
In a joint statement, Agri SA and Agricultural Business Chamber of South Africa (Agbiz) on Tuesday said the R3 per litre fuel levy reduction announced by government offers “important and timely relief” amid rising global energy prices.
The intervention comes as fuel costs are set to rise sharply from 1 April.
The levy cut, announced jointly with the finance minister Enoch Godongwana, is aimed at cushioning consumers and producers from the impact of global oil price volatility, exacerbated by ongoing geopolitical tensions in the Middle East.
“As the government has noted, rising fuel costs are already placing upward pressure on food and transport inflation, with broader implications for the economy,” the organisations said.
The government noted that this intervention is particularly significant and it represents a R6 billion relief for the country and consumers.
“Fuel is a core input across the entire value chain, supporting on-farm production, irrigation, harvesting, processing and logistics. In most farming systems, fuel accounts for between 12% and 18% of production costs, making it a critical cost driver in periods of volatility.”
The agricultural organisations added that the relief measure will therefore help to ease immediate cost pressures and could play an important role in buffering against further food price inflation in the near term.
“Recent engagements with farmers and fuel suppliers indicate that the sector is experiencing a combination of price increases, supply constraints and operational uncertainty at farm level, particularly during the coming production periods for winter and summer grain.”
The statement said that other major inputs such as fertiliser, often accounting for up to 35% to 50% of production costs, are also under upward pressure due to global supply disruptions and geopolitical risks.
“This compounds the financial strain on producers and increases the sensitivity of the sector to further shocks. Against this backdrop, while the temporary fuel levy relief is a positive and necessary step, it should be seen as part of a broader set of interventions required to stabilise the system.”
AgriSA and Agbiz then called for additional, targeted measures to improve market responsiveness and ensure continuity of supply, including:
The statement concluded that the organisations also note the government’s intention to pursue a broader package of support measures and a review of the fuel pricing framework over the medium term.
“This process will be critical in addressing structural inefficiencies and ensuring that the fuel pricing system remains aligned with the needs of key productive sectors of the economy, in particular the agricultural value chain.”
Dawee Maree, head of agriculture information and marketing at FNB, said that the increase in diesel is bad news and good news.
“Bad news in the sense that it will have a significant impact on the agricultural industry in terms of production costs and transportation," Maree said.
"But in reality, it could have been worse - the under-recovery was more than R10/litre. But the Minister of Finance gave the reprieve of reducing the fuel levies by R3/l. A small number, but it will alleviate the pain a bit.”
Professor Waldo Krugell, a North West University Business School economist, said a R7 increase in diesel price is better than the expected R10 increase.
“The decrease in the fuel levy will make a difference but R7 is still a big increase; it's going to push up transport costs and costs in agriculture, and we are going to see these increases in April.”
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