09.03.2012

High administered prices put investors off

Agribusinesses applauded finance minister, Pravin Gordhan for putting emphasis on reducing the cost of doing business in South Africa during his 2012 budget speech.

Gordhan said that rapid increases in administered prices must be addressed.

But, according to the Agricultural Business Chamber, Gordhan’s words carry little weight, as the increase in the fuel levy (28c/l) and “the remaining burdening regulatory regime” will only cause the cost of doing business to increase further.

Agribusinesses applauded finance minister, Pravin Gordhan for putting emphasis on reducing the cost of doing business in South Africa during his 2012 budget speech.

Gordhan said that rapid increases in administered prices must be addressed.

But, according to the Agricultural Business Chamber, Gordhan’s words carry little weight, as the increase in the fuel levy (28c/l) and “the remaining burdening regulatory regime” will only cause the cost of doing business to increase further.

According to Lindie Stroebel, economic intelligence manager at the Agricultural Business Chamber, the increase of administered and regulated prices has caused a decline in investor confidence.

“Currently, South African businesses are experiencing relatively strong balance sheets, but due to various uncertainties, we see very little of the money being converted into capital investment. Important factors considered by businesses before deciding to invest capital are whether or not the environment in which they are investing is stable and what their return on investment is likely to amount to.

André Jooste, senior manager at the market and economic research centre of the National Agricultural Marketing Council, said at the recent Agri SA policy conference in Stellenbosch that between January 2008 and December 2011 the price of water and other services increased by 36% while the price of electricity and other fuels increased on average by 109%.

During this time, the price of unprocessed food products increased by only 28% and that of processed food by 38%.

“Cost pressures have also seen the gap between gross and net farm income increase significantly since the 1990s,” said Jooste.
According to Jooste, the administered price index increased by about 13% between December 2010 and December 2011. During this time, the regulated price index increased by 15%. Jooste said the government urgently needed to commission new, up-to-date studies on the regulatory frameworks and processes underpinning the determination of administered prices.
Increased attention needed to be given to the economic impacts of administered pricing decisions.

Article source: www.farmersweekly.co.za

Copyright © 2018 by Agricultural Business Chamber