JOHANNESBURG - The latest fuel price hike of 4.9 cents a litre will hit the agriculture sector the hardest and the costs are likely to be gradually passed on to the consumer up the value chain, senior agricultural economist at FNB Agri-Business Paul Makube said on Tuesday

The department of Energy on Monday decided to limit the fuel increase to only five cents per litre to cover the costs of wage increases for frontline staff at garages, including petrol attendants, cashiers and other admin staff.

"At current levels, the cost of producing and transporting agriculture commodities continues to erode profit margins as close to 80 percent of grain is transported by road. These costs will gradually be passed on to the consumer up the value chain as businesses struggle to absorb the added costs," Makube said.

"This is not good news for the agriculture sector as we head into the new crop season."

The adjustment means the price per litre of 95-octane petrol will go up on Wednesday from R15.44 to R15.49 at the coast and from R16.03 to R16.08 in Gauteng province.

Earlier projections indicated that the fuel price should have increased by over 20 cents per litre, meaning the government has absorbed the bulk of the increase.

Makube said this was a welcome relief for consumers whose disposable income has been under pressure from consecutive hikes in the past few months, pushing inflation higher although still within the Reserve Bank's tolerable range of three to six percent.

He said the poorest households who spend a large portion of their income on transport however remain under strain as travelling costs remain high at current levels. 

- African News Agency (ANA)