Christo Viljoen

9 October 2018: The Ministry of Mines and Energy has announced another increase of 50 cents per liter petrol and diesel as of from Wednesday last week. Although the National Energy Fund continues to pay a fair share of the full costs incurred, it nevertheless means that prices in Namibia have almost reached the N$14 mark for unleaded petrol as well as the two types of Diesel. 

The latest increase had been unavoidable and was largely due to the combination of rising world crude oil prices and a weaker Rand to which the Namibia Dollar is pegged.  

Small business and the poorer households will bear the brunt as their transport costs account for a large portion of household expenditure and the consequence of a sustained fuel price increases will further erode disposable income and cause financial stress. This will force a change in spending patterns with a cut in spending on luxury items and frequency of visits to eateries.
We might face a dim festive season if the current pace of fuel prices increases is sustained in the two months ahead. 

At producer level, the impact will be cost pressures as we head into the new planting season for summer crops. The higher crude oil price, which has now breached the US$80/ barrel level, is a double whammy due to the direct influence on the fuel price and the indirect influence on oil derivatives such as fertilizer, pesticides and herbicides (agrochemicals) all of which are inputs in crop farming.

This will squeeze profit margins if agriculture commodity prices do keep up with the pace of input cost increases. 

*Christo Viljoen is the Head of Agri and Tourism at FNB Namibia