Fuel price hike to affect food prices

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By Neo Kolane

Local agricultural economist, Montoeli Rantlo believes that Basotho are set to feel the pinch of the increase of food prices as Lesotho imports most of its food commodities from the neighbouring South Africa.

Rantlo’s comments come after steep price increases in petroleum products in South Africa. Earlier this month, the prices of petrol, diesel and illuminating paraffin in Lesotho increased by M1.30, M1.40 and M1.10 respectively.   

Recently, South African online media platform, The Insider, said: “South African consumers will have to dig deeper in their pockets at the tills this festive season, with food prices set to rise on the back of rising petrol prices, feed, and input costs.”

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Rantlo suggested that the price increases on such petroleum products will inevitably affect Lesotho consumers as well.

He said the increases are to affect household consumption and investment patterns with town dwellers and urban inhabitants mostly hard hit as they do not produce food. That, he added, would force them to spend more on food purchases.

“People will switch from the usual food they are used to and shift to other kinds of food just to feed their stomachs.

“The quality and diversity of food in the household will change,” Rantlo said.

When mentioning the investment pattern, Rantlo said it is the pattern that solely focuses on the budget noting that investment changes when food prices increase.

“There should have been a subsidy or government incentive because we saw that petrol price increase began around August 2021 and as such people knew that it is going to affect production.

“The subsidy or government incentive is a financial aid or support extended to an economic sector (business, or individual) generally with the aim of promoting economic and social policy.

“People should have advised themselves to have policies that subsidize farmers so as to have coping mechanisms for the fuel price hike,” he warned.

“We do not rely on domestic producers. We need to strengthen our food production so as to be ready for any fuel increase,” Rantlo said.

The Petroleum Fund recently issued a statement that the pricing of petroleum products in the Southern Africa Customs Union (SACU) is based on import parity mechanisms. The mechanism assumes that all petroleum products are imported from the main refining centres of the Middle East, Europe and Singapore.

“In the last five months, prices of the three controlled products have been increasing relentlessly with the exception of September when there were decreases of 20 lisente per litre on all petrol grades, 30 lisente per litre on diesel and 20 lisente per litre on illuminating paraffin,” the fund said.

The statement continued that the increases occurred in June, July, August, October and November 2021.

I warned: “These unprecedented increases have been caused mainly by international crude oil prices and the prices of these products in major refining centres of Europe and Singapore.

“Another factor is the plummeting of the rand (to which loti is pegged) against the United States (US) Dollar as the US Dollar is the currency used for the purchase of crude and these products in the international markets,” the statement read.