Big price shock awaits SA consumers next month

The expected 95 cents a litre increase the price of diesel with a petrol price hike of around 85 cents will hit consumers like a ton of bricks.

This according to debt management firm Debt Rescue, which pointed out that the fuel price hike is in conjunction with a 7% inflation rate, while food inflation is expected to rise to 12%.

Neil Roets, CEO of Debt Rescue, said the short to medium term outlook for consumers looks increasingly gloomy with the depreciation of the rand playing a major role in the overall picture.

“Every commodity we import from abroad has to be paid for in US Dollars and that includes crude oil. As things stand at the moment there is a strong likelihood that the exchange rate may weaken and that the price of crude will start rising again,” Roets said.

The increase in diesel is particularly worrisome as virtually everything used by consumers is transported by road, he said.

“The problem is that the severe drought earlier in the year – especially maize producing areas – is going to lead to substantial increases in the price of all foodstuffs including staples like maize and wheat which will have to be imported at almost twice the local price.

“There is little the government can do to mitigate the prices of food, especially the cost of maize meal which is expected to increase by 50%,” Roets said.

The Reserve Bank also raised its repo rate by 25 basis points to 7% last week, following a 50 basis points hike in January.

Independent economist Dawie Roodt said it was likely that the Reserve Bank would increase the repo rate by as much as 100 points during the course of the year to combat inflation.

“I would not be surprised if they increase it by 125 basis points because inflation in general and food inflation in particular has become a long shadow hanging over the government,” Roodt said.

Roets said there was a host of other increases including Eskom’s request for a double digit increase coming down the pipeline that were going to massively impact on consumers who are already vastly over indebted.

Eskom has been given the green light to raise electricity tariffs by 9.4% in April.

Inflation hit 7% year-on-year in February from 6.2% in January, data from Statistics South Africa showed on Wednesday, the highest rate since May 2009.

The energy department is expected to announce the fuel price changes for April, on Friday – 1 April, 2016.

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Big price shock awaits SA consumers next month