Price hike double-blow to hit South Africa from March: FNB

South African consumers will need to grapple with increased energy costs in the coming weeks, with both an electricity price hike and steep fuel price set to hit, says FNB economist Koketso Mano.

The National Energy Regulator of South Africa (Nersa) has approved an average electricity tariff increase of 9.61% for the 2022/23 financial year. While this increase will be felt by consumers, it is still some sort of reprieve after Eskom applied for 20.5% hike, Mano said.

“Generally, we expected electricity price inflation to be in double-digits once again this year. Inflation in 2021 was nearly 15% for direct consumers and 18% at the municipal level.

“This is broadly in line with the theme of providing some relief to businesses and consumers during the ongoing [economic recovery]. However, electricity is still running above headline inflation.”

South Africans who rely on grants and are facing financial tightening after the Coivd-19 pandemic are particularly at risk, as more of their monthly funds will go to electricity, she said.

This will also be the case with fuel prices which will increase by R1.46 per litre from Wednesday (2 March), Mano said.

“These electricity and petrol price increase filter through to the production and distribution of goods. It also includes the delivery of services, transport and general household living costs.”

“This will be something that further constrains household expenditure going forward. Over time, this could constrain spending and dampen the [economic recovery], especially if interest rates rise faster than expected.”

Mano said there was a concern the South African Reserve Bank could hike rates above forecast levels this year to help contain inflation levels.

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