Double-blow for South Africa this week
South African consumers face a financial double-blow this week as new lockdown restrictions and price hikes take effect.
Businesses and homeowners can expect to pay significantly more for electricity from 1 July as Eskom’s latest price hike will be incorporated into municipal bills.
Cape Town residents can expect to pay 13.48% more for electricity, while Johannesburg and Durban residents will be paying 14.59% from their municipalities.
Residents in these cities can also expect to pay more for water and other municipal services from this date.
“These high price hikes are set to keep rising well above inflation year on year as Eskom faces serious financial issues. And what is even more frustrating, is that South Africans are also having to spend even more money to buy alternative power sources during load shedding,” said the Southern African Faith Communities Environment Institute (SAFCEI).
“As a result, many families now find themselves unable to sustain electricity costs for a month and are making difficult choices between food, toiletries, and travel so they can have lights and warmth.”
Those consumers who are directly supplied by Eskom were already hit with a 15% tariff increase as of 1 April, the result of Eskom succeeding in contesting a price increase for this year from the National Energy Regulator (Nersa) of 15.06 %.
The hikes will be a particularly bitter pill to swallow for the thousands of South Africans who have again been prohibited from earning a living due to the introduction of new adjusted level 4 lockdown restrictions from Monday (28 June).
Bars, gyms and cinemas have all been prohibited from opening until at least 11 July, while other businesses such as restaurants face greatly reduced trading due to a new evening curfew and tougher restrictions.
Unlike the country’s previous lockdowns, these businesses also cannot rely on the government-provided Temporary Employer/Employee Relief Scheme and other financial support mechanisms which ended earlier this year.
South Africans under pressure
South African consumer confidence declined in the second quarter after the government ended increased social welfare payments and temporary relief measures for workers who lost their income because of the coronavirus pandemic.
A quarterly index measuring sentiment fell to -13 in the three months through June from -9 in the previous quarter, First National Bank said in an emailed statement Monday. The index has now erased gains that saw it return to pre-pandemic levels earlier this year and remains below the average consumer-confidence reading of 2 since 1994.
The decline is largely due to an “alarming turnabout” in sentiment among low-income households, with the mood among the least-affluent consumer group that earns less than R2,500 per month falling from zero to -22, while confidence among higher-income categories deteriorated only marginally, FNB said.
Household consumption expenditure accounts for about 60% of gross domestic product.
While the third wave of coronavirus infections, rising food and fuel prices and a weak recovery in low-income jobs that were lost last year are likely to have weighed on the index, the expiration of virus-related temporary welfare measures “arguably dealt the largest blow to the spending power and confidence levels of low-income consumers,” said FNB Chief Economist Mamello Matikinca-Ngwenya.
“In the absence of further expansionary welfare spending by the government, the prospects for low-income consumers and non-durable goods retailers are very much tied to job creation, which has been the Achilles heel of the South African economy,” she said.
Almost a third of the country’s workforce is unemployed, latest data from Statistics South Africa show.
Additional reporting by Bloomberg
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