A Closer Look

Interview: Gavin Kelly (CEO of the Road Freight Association)

Price shocks ahead for the consumer – the economic chickens are coming home to roost.

Can we afford Christmas? Maybe this year – but the bad news is that prices will rise even faster in 2022. A number of factors have come together to create price shocks in consumer goods which will be felt right into the new year. In the case of poultry, input costs have risen dramatically: mainly feed and labour costs.

But the added costs of transport will also put a strain on chicken’s affordability. Gavin Kelly, CEO of the Road Freight Association, said that a major price shock for the transport industry would take place in early 2022, when insurance premiums go up.

SASRIA Premiums will Rise

“Our volatile social situation means that the premiums for SASRIA riot cover – which is not covered by ordinary insurance – will most likely rise by 1000%,” he said in an interview.

“Add to that the cost of petrol, which has just hit a record high, the deteriorating rand-dollar exchange rate, and the decrease in business confidence, and it is likely that prices will continue to climb steeply.”

Transport  – More Expensive

Kelly made the point that food such as poultry is transported many times in its journey from the farm, or the port, to the dinner table. Each leg of these journeys has become more expensive.

“During harsh lockdown, when only the essentials were allowed to be transported, obviously the prices went up. Unfortunately during that time a number of transport companies went out of business, and this had an overall impact on supply and demand. Every time a truck is damaged in a riot, or transport is disrupted in some way, this will increase the risk. And increased risk implies increased prices.”

June Riots Shaken Confidence

“The June riots were an outlier, but they have really shaken the confidence of the business sector. It was anarchy, we would never have believed that we would see the kinds of looting and mayhem that went on. And so, when the business community loses confidence they take more precautions against risk. And all of these things increase the cost of doing business, and these costs are then passed on to the consumer.”

“So we did see a price spike in July, which then adjusted down a little when people started recovering from the riots. But if you now add to that… the rand has just taken a beating, and the price of fuel has gone up… so that spike in prices in July might have been the beginning of a steady rise in prices across the board.”

Leave a Reply