African farmers get no relief at petrol pump, despite plunge in oil prices

Falling oil prices

Falling oil prices are not trickling down as cheaper petrol for African farmers, further straining a region roiled by the commodity crash and a record drought.


With almost half of the costs of her fruit-selling business spent on transportation, Harriet Namakula was hoping cheaper oil would provide a bump to her bottom line.

But the 40-year-old farmer says the $4 daily fare she pays to take her 250-pound sacks of fresh mangoes to market has not dropped despite the global crude rout, offering no relief from narrow margins and the rising cost of farming equipment and supplies.

"If I miss the first truck, I may be charged even more," Ms Namakula said as she strolled through a lush green mango grove, pushing sagging fruits from her way. "We hear oil prices are dropping, but for us in Uganda, nothing has changed."

Bony Mbarebaki, a truck driver in Kampala, said truckers have been squeezed too. "We have been forced to increase fares. It is not good for our clients, but there is no alternative," said Mr Mbarebaki, 42.

A plunge in oil prices, which touched a 13-year low in February, is wreaking havoc on the finances of large African oil producers like Nigeria and Angola.

Early this month, Angola said it would turn to the International Monetary Fund for a bailout, joining a growing list of commodity-dependent African economies seeking assistance to weather the adverse economic climate.

Inadequate regulation in most countries allows importers to quickly increase pump prices as global prices rise, but they are not eager to slash them as prices fall.

This slows the pace at which low prices trickle down to consumers, experts said.Lower prices have mainly benefited importers and distributors in the form of low operational costs.

Reduced import bills have also allowed some countries such as Ivory Coast and Ghana to put off raising interest rates to boost growth.

But economists hoped the rout would also yield extra cash for companies and consumers in fuel-importing countries like Uganda and Kenya.That is not happening.


In SA and Malawi, currencies have dropped even further than the dollar-denominated oil price, erasing any savings.

In Zambia and Sudan, governments have cut fuel subsidies that weighed on their budgets, keeping pump prices flat for many consumers.

"With weakening currencies largely offsetting the positive impact of weaker oil prices, consumers can expect little to no relief in pump prices," said Irmgard Erasmus, an economist at NKC Africa Economics.

"In countries where living standards are already stretched by high food prices, this means more pressure on consumers."

In Uganda, Malawi and Tanzania, petrol and diesel prices have dropped by less than 5% over the past year.
In Zambia, Zimbabwe and the Democratic Republic of Congo, they have actually risen by about 15% thanks to falling currencies.

Those increases are particularly damaging to farmers who anticipate lower yields amid the worst drought in decades.

Officials will have to supplement their failed corn and wheat crops with pricey imports, threatening to push up inflation that has spiked to double-digit annual rates in Zambia and Malawi.

Peter Phiri hoped the oil price drop would cut the $900 he spends each month on fuel to plow, tend and harvest his 100-acre wheat farm in Zambia.Instead, he is paying more to farm less, pushing him near financial ruin.

During the two-month planting season through November, Mr Phiri had to stop work for a week because he ran out of money to buy diesel.

"I could not adequately prepare my farm before the rains," Mr Phiri said. "We aren’t seeing any benefit from low oil prices."

To keep afloat, Mr Phiri and Ms Namakula, the mango grower, have had to raise the price of their produce.
Ms Namakula, who also grows coffee on her 10-acre farm north of Kampala, has raised the price for two pounds of mangoes by 15%, to about 3,000 shillings, or around 85 US cents.She said the higher prices have taken a toll on sales volume.

Her coffee earnings, meanwhile, are down by a fifth, amid lower prices for that commodity.
"It’s even more painful when you know you shouldn’t be paying that much for fuel," Ms Namakula said.