Ru­ral, ur­ban price dif­fer­ence widens

. . . as higher fuel prices in­crease trans­port costs

Lesotho Times - - Business - Bereng Mpaki

THE lat­est fuel price in­creases which re­sulted in the price of petrol go­ing up by 75 lisente per litre are likely to push up the cost of liv­ing while at the same time in­creas­ing the price dis­par­i­ties for consumer goods in ur­ban and ru­ral ar­eas.

Last week, the Petroleum Fund un­veiled the new fuel prices, which also showed marked in­creases in the prices of both grades of diesel (up by 55 lisente per litre) and paraf­fin (up by 45 lisente per litre).

This means the new re­tail price of petrol is M9.35 lisente per litre, while con­sumers will pay M8.95 lisente per litre for diesel500 and M9.20 lisente per litre for dieasel50. The whole­sale price of il­lu­mi­nat­ing paraf­fin rose to M6.35 lisente per litre.

The changes in fuel prices play a sig­nif­i­cant role in de­ter­min­ing what con­sumers pay for var­i­ous goods and ser­vices.

It can only get worse for con­sumers in ru­ral ar­eas who al­ready have to pay more than their ur­ban coun­ter­parts mainly due to the greater costs as­so­ci­ated with trans­port­ing goods fur­ther afield.

Con­sumers in most re­mote parts of the country have to part with M10 for a litre of paraf­fin which costs M8 in ur­ban ar­eas. The ru­ral cus­tomer also pays more for air­time, with a voucher whose face value is M5 go­ing for M6.

Pri­vate Sec­tor Foun­da­tion of Le­sotho (PSFL) Chief Ex­ec­u­tive Of­fi­cer Thabo Qh­esi at­trib­uted the price dif­fer­ences to the ex­tra trans­port costs in­curred in trav­el­ling to re­mote ar­eas.

“There are a num­ber of fac­tors in­flu­enc­ing price dis­par­i­ties be­tween ur­ban and ru­ral ar­eas, but I be­lieve trans­port is a ma­jor one,” he said.

“This is be­cause busi­nesses op­er­at­ing in re­mote parts of the country have to in­clude the cost of trans­port­ing the goods from whole­salers in ur­ban ar­eas.”

Mr Qh­esi also noted that sev­eral dis­tricts did not have com­mer­cial ports of en­try, which meant their goods trav­elled longer dis­tances by road via ports in other dis­tricts.

“For ex­am­ple, traders in Mokhot­long and Thaba Tseka have to en­ter the country via al­ter­na­tive ports such as Cale­don­spoort and Maseru,” he said.

“The re­sult, un­for­tu­nately, is the trans­fer of trans­port costs to the fi­nal consumer. Since fuel prices in­creased last Fri­day, this means that the cost of trans­port also in­creased for busi­nesses and they will pass on the cost to con- sumers. Even­tu­ally, con­sumers in ru­ral ar­eas will be worse off than their ur­ban coun­ter­parts.”

Mr Qh­esi said the higher cost of op­er­at­ing a busi­ness, cou­pled with the lower spend­ing power of peo­ple in re­mote ar­eas, had been ag­gra­vated by re­trench­ments of South African-based min­ers in re­cent years. Re­sul­tantly, fewer busi­nesses were open­ing branches in ru­ral ar­eas.

Le­sotho Cham­ber of Com­merce In­dus­try ( LCCI) Gen­eral Sec­re­tary, Fako Hakane, con­curred, say­ing the low com­pe­ti­tion among traders in ru­ral ar­eas was also con­tribut­ing to the higher prices of goods and ser­vices.

“Due to the low num­bers of traders in the re­mote places, there is low price com­pe­ti­tion and, there­fore, there is no pres­sure to lower prices.”

Mr Hakane said the poor state of ac­cess roads also con­trib­uted to the wear and tear of ve­hi­cles which was fac­tored in the to­tal costs of trans­porta­tion. He said this could be rec­ti­fied through proper plan­ning of hu­man set­tle­ments with rel­e­vant in­fras­truc­ture to sup­port busi­nesses.

“As things stand, it is very dif­fi­cult to op­er­ate a busi­ness in re­mote parts of the country be­cause set­tle­ments are scat­tered widely, pos­ing a se­ri­ous chal­lenge for en­trepreneurs,” Mr Hakane said.

“It would be eas­ier to set up busi­nesses that pro­vide ef­fi­cient and cheaper ser­vices to cus­tomers if the set­tle­ments had been planned as clus­ters.”

Mean­while, the Min­istry of Small Busi­ness De­vel­op­ment, Co­op­er­a­tives and Mar­ket­ing says there are no mech­a­nisms for price con­trol in Le­sotho af­ter th­ese were abol­ished in the 1990’s to en­cour­age free mar­ket sys­tem. A com­pe­ti­tion pol­icy is be­ing drafted to over­see price con­trol among other things.

The new re­tail price of petrol is M9.35 lisente per litre, while con­sumers will pay M8.95 lisente per litre for diesel500 and M9.20 lisente per litre for dieasel50.

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