Spike in food and fuel prices could trigger riots

Consumers have been facing food price increases significantly higher than the rate of inflation.

Consumers have been facing food price increases significantly higher than the rate of inflation.

Published Jun 5, 2022


Johannesburg - Experts are warning that the recent hikes in petrol and food prices are creating a desperate society that may see a repeat of the July 2021 riots of looting and destruction that cost the economy an estimated R50 billion.

While South Africans are still reeling from electricity tariff increases, hikes in the repo rate, food inflation and transport costs, they have been hobbled by month-on-month increases in petrol prices that have now reached R24 per litre. The petrol price increase has already added significantly to the overall consumer price inflation. This will increase the pressure on households whose incomes have shrunk over the two years of the pandemic because of job losses and Covid-19 salary cuts.

On Wednesday, the designated day for petrol price changes by the Central Energy Fund for the Department of Mineral Resources and Energy, the retail prices of unleaded 95 and unleaded 93 petrol increased by R2.33 and R2.43, respectively. Diesel went up by R1.10 per litre while illuminating paraffin, which many South Africans rely on as a cheaper source for cooking and lighting, rose by R1.56 a litre.

The increases have increased the pressure on 7 862 million unemployed people who will feel the brunt of food inflations harder than most.

The spiralling cost of food, fuel and transportation, coupled with high unemployment and government corruption, has angered many South Africans who have called for the removal of President Cyril Ramaphosa and a ‘National Shutdown’.

Lara Hodes, an economist at Investec Bank, said the fuel increase would add to the burden on consumers who are already feeling the pinch of price inflation. “Transport costs are a key input into most goods, and hence we are likely to see the cost of living rising even further, diluting already limited disposable incomes,” she said.

Agricultural economist Dr Thulasizwe Mkhabela said the hike would impact food processing, which would ultimately be transmitted to consumers at the retail shelves.

“Any rise in the fuel price increases the cost of production, and such increased costs are invariably transmitted to the consumer through increased food prices. This is particularly important in times of unreliable electricity supply because of persistent load shedding,” she said.

Agricultural output or farm produce is normally not converted into food at the farm but is processed elsewhere. After processing, it is transported to retail outlets and other final selling places by road in South Africa, Mkhabela said.

“This is another pathway through which increases in the fuel price adversely affect food prices. In short, there is a direct correlation between the price of fuel and food.” Piggery farmer Ronnie McKenzie said there was no reason why people should be paying high prices for fuel, adding that the surrounding countries that South Africa subsidises were paying less at the petrol pump.

“We’ve been over-taxed. As Farmers United of South Africa, we’ve pleaded with the Department of Agriculture and Land Reform to see that farmers are subsidised immensely to produce food cheaper and cushion the heavy fuel taxes.

“As a nation, we’ve never questioned what led to our oil reserves being sold by (Tina) Joemat-Pettersson while she was a minister. When will we receive answers to that effect?

“We now have to pay just above R50 for two litres of fuel. It’s ridiculous, and such warrants arrests and deeper investigations of politicians colluding in the energy space. It’s time South Africans wake up from their slumber”.

McKenzie added that corruption was the leading cause of the rise in the cost of living. McKenzie said that the Russia/Ukraine war could not be the reason as the Russians were still selling fuel to the rest of the world.

This week the DA’s Mineral Resources and Energy spokesperson, Kevin Mileham, described the hikes as bordering on criminality, adding that the knock-on effect of the fuel price would take food off the tables of hundreds of thousands of people.

“The ANC government uses the centrally controlled fuel price to thieve and loot South Africans of their money.

“The exorbitant new fuel price announced a short while ago is nothing short of criminal,” he said.

Fuel prices went up by a record high of more than one rand and with the Ukraine invasion, South Africans are being told to brace themselves for more increases. This will have a ripple effect on food prices and other goods. Picture Leon Lestrade. African News Agency/ANA.

An agricultural economist and policy analyst at Agbiz, Thapelo Machaba, said: “An increase will decrease the size of average food basket for low-income households.

“Increased petrol prices also mean it becomes more expensive to move products across the country, and those costs are ultimately passed on to the consumers. Still, those earning the highest income will not feel the impact, only ordinary citizens.”

The SA National Taxi Council (Santaco) and National Taxi Association (NTA) have warned that another taxi fare increase was on the cards due to the recent price increments.

Santaco chief strategic manager Bafana Magagula said it was a norm that the industry increased prices every year around June and July, but the difference this year was the continuation of fuel price increases.

“Therefore, taxi fares might rise a bit higher than normal,” he said.

NTA spokesperson Theo Malele said the industry had been impacted negatively with some people losing their vehicles, leading to job losses.

The minibus taxi industry says the latest fuel price increases might force them to look at the possibility of fare increases to cope with the high costs of operating.

In April the National Energy Regulator of SA announced that Eskom’s tariff increase for 2022/23 would be 9.61%, a figure which constituted a 3.49% increase for the year alongside legacy costs from the previous years.

The price hikes took the average electricity tariff from R1.33 per kWh to R1.46.

The SA Reserve Bank Monetary Policy Committee recently increased the repo rate by 50 basis points to 4.75% a year. This means home loan holders will have to dig deeper into their pockets to maintain their bond repayments.

The latest Consumer Price Index for April 2022 showed that headline inflation was at 5.9%, while transport prices rose by 14.7% owing to fuel price hikes. Prices of food and non-alcoholic beverages increased by 6.0% year-on-year.

Political analyst Sethulego Matebesi said people were desperate to survive and the price hikes and worsening material conditions fuelled growing discontent. This could become a disruptive force that may prove worse than recent service delivery protests.

Matebesi said the middle class was not insulated from the impact of price hikes.

“We don’t even have to talk about those who have already been in poverty for years. Imagine what is happening to the souls and the minds of ordinary South Africans who are unemployed and do not have income, if your middle class is feeling the pinch,” said Matebesi.

“When people are in survival mode, it would be dangerous for South Africa. We saw this happening in other countries.

Many high-tech goods stolen during the recent riots in Durban have been blocked or blacklisted. Picture: Motshwari Mofokeng/African News Agency (ANA)

“But they (the government) need to look at this. We heard from the experts how South Africans are taxed for fuel, which is unacceptable. The question is, what are they (the government) doing about this?”

Political analyst Ralph Mathekga said he was not surprised that ordinary working class South Africans had called for a national shutdown because the rising cost of living had made it near-impossible for them to lead decent lives.

“Remember Covid-19 made it worse, and now we have Ukraine/Russia,” Mathekga said.

“And we have policymakers who don’t get it and still waste money. We also have the governing party that does not have a solution for these problems.

“This is why we will see such movements as the national shutdown. People believe that the system has never functioned,” said Mathekga.