‘Perfect storm’ to hit finances in South Africa from this week

Rising inflation, interest rate hikes and higher fuel prices point to a ‘perfect storm’ of factors that are set to hit South African consumers from this week, says labour union Solidarity.

The group was commenting on Statistics South Africa’s latest inflation figures which indicate a 5.7% increase in the consumer price index (CPI).

The South African Reserve Bank’s monetary policy committee is largely expected to hike interest rates on Thursday afternoon (24 March), with steep petrol and diesel hikes pencilled in from the start of April.

Solidarity warned consumers cannot keep up with all the price increases they have to carry – and more pressure on South Africans would have disastrous consequences. It added that the salaries of most people have been adjusted at the beginning of the year.

“Thus, the sky-high inflation we are currently experiencing has not been included in such adjustments,” said Theuns du Buisson, economics researcher at the Solidarity Research Institute (SRI)

“Moreover, fuel price inflation of 29.4% is much higher than general inflation. Employees are struggling to make ends meet as they are simply losing more and more buying power every month. Even after increases salaries just cannot keep up with inflation and you have to buy less and less, even if you are earning a little more.”

To address these issues Solidarity is calling for fuel prices to be deregulated in their entirety and set by the market.

“Virtually all the major price increases in the latest CPI release occur among the regulated administrative prices, which rose by a shocking 16,7% over against general inflation of 5,7%.

“In short, where the government is involved, it is to total detriment of everyone. Breaking the government’s stranglehold on the economy is no longer something that is merely desirable but has become imperative. The government’s incompetence has now indeed become unaffordable,” Du Buisson said.

Solidarity also appealed to the South African Reserve Bank (SARB) not to raise interest rates in the announcement this week. According to Solidarity, South Africa’s economic predicament can be attributed to fiscal and regulatory policy rather than to relatively low-interest rates.

“At the moment, consumers are facing the perfect storm that is having an extremely negative impact on their budgets. This must be stopped in its tracks immediately, the deregulation of all fuel prices, as well as an unchanged or even lower interest rate being a good starting point,” Du Buisson said.

Read: 9 things that are now more expensive in South Africa – and how it will hit your grocery bill

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‘Perfect storm’ to hit finances in South Africa from this week