Johannesburg- The surge in fuel prices is likely to put brakes on South Africa’s bullish agriculture sector, economists have warned.
The Automobile Association (AA) has warned motorists and businesses to brace themselves for a hefty petrol price increase next month. Preliminary data from the Central Energy Fund shows that the petrol price will likely go up by about 98c a litre.
The AA said R20 a litre for petrol is now a realistic scenario before the end of 2021, and that the expected hikes in diesel and paraffin would be the largest to date.
Paul Makube, a senior agricultural economist at FNB Agri-Business, said the maize-planted area remained well above the long-term trend and indicated another huge crop in the year ahead.
“Nonetheless, profit margins are not necessarily at record highs given the massive cost pressures emanating from energy complex with fuel prices reaching a record high early in the crop season. The strength in international crude oil prices filtered through the value chain, which saw its derivatives such fertiliser, pesticide and herbicide prices increasing sharply this season. Overall, another fantastic agriculture season for SA in the year ahead,” he said.
South Africa’s agricultural sector is one of the world’s most diverse, consisting of corporate and private intensive and extensive crop farming systems. The commercial farming sector is the backbone of the country’s agricultural economy and last year showed the best growth rate of all economic sectors at 13.1%.
Wandile Sihlobo, a chief economist at the Agricultural Business Chamber, said rising fuel prices were going to add pressure on SA’s agriculture sector in the 2021/22 season.
“In terms of annual fuel usage, it is worth noting that South Africa transports by road roughly 81% of maize, 76% of wheat, and 69% of soybeans. On average, 75% of national grains and oilseeds are transported by road.”
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