Petrol price hike and other increases set to hit South Africa

After reprieve at the petrol pumps in January, South African motorists could see another hefty hike in February on the back of increasing international oil prices, according to economists from the Bureau for Economic Research (BER).

Following a tumultuous first trading week of 2022, global equity and bond markets were calmer last week. There was more action in commodities, with the one-month Brent crude oil future ending the week more than 5% higher, the group said in a research note on Monday (17 January).

“A combination of oil demand holding up despite the Omicron-driven surge in Covidinfections (especially in the US) and supply disruptions boosted the oil price,” it said.

“After some reprieve on the domestic fuel price front in January, the renewed rise in the oil price is likely to result in another hefty fuel price increase in February.”

Rate hike 

There will also be a significant focus on inflation data this week ahead of the South African Reserve Bank’s interest rate decision on 27 January, the BER said.

“We expect the headline CPI to increase by 5.8% y-o-y (consensus is at 5.7%), up from 5.5% in November. This is courtesy of a projected 0.4% m-o-m rise, driven by the more than 70c/litre rise in both the petrol and diesel price at the start of that month, as well as the quarterly survey of rental costs.

“As a result of the seasonal rise in meat prices, the food category should also add to the overall monthly CPI increase.”

South Africa is likely to see at least three interest rate hikes in 2022 as the South African Reserve Bank (SARB) has indicated that it will begin unwinding its accommodative monetary policy stance, say economists at Momentum Investments.

In a research note on 4 January, the group said that the SARB’s quarterly projection model calculates a steep interest rate hiking cycle – resulting in interest rates of 5.75% by the end of 2023 and 6.75% by the end of 2024.

“In our view, well-behaved inflation, anchored inflation expectations, and a pedestrian growth outlook advocate a more moderate interest rate hiking cycle,” Momentum said.

“We expect the SARB to hike interest rates thrice by a cumulative 75 basis points in 2022 and a further three times by another 75 basis points in 2023.”

Electricity hike 

The National Energy Regulator of South Africa (Nersa) is also expected to table its 2022/23 price determination in parliament at the end of February or the beginning of March.

Eskom chief financial officer Calib Cassim has confirmed that the state-owned power utility has applied for an electricity price increase of 20.5% for its 2023 financial year, set to take effect from 1 April 2022.

On 5 March 2021, Nersa approved a hike of 15.06% for Eskom’s direct customers, which was subsequently implemented on 1 April 2021. A hike of 17.80% for municipalities was implemented on 1 July 2021.

Cape Town mayor Geordin Hill-Lewis has warned that similar increases would simply be unaffordable for most South Africans this year.

“Like the majority of South Africans, many Capetonians are struggling to make ends meet. The pandemic and national lockdown led to the closure of hundreds of businesses in our City and the loss of thousands of jobs. Our residents are faltering under the burden of the rising costs of energy, fuel, food, and basic consumer goods.

“The consumer price index (CPI) is currently stated as 5,5%; this would have been a more reasonable tariff increase for Eskom. The price of electricity has risen by 307% over the past 13 years, far exceeding inflation. Despite paying more for power, South Africans have experienced an unreliable electricity supply — 2020 and 2021 were two of the worst load shedding years on record.”


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Petrol price hike and other increases set to hit South Africa