South African consumers are having to contend with higher fuel prices this month, which could push many over the edge.
Today, 7 February, petrol prices have been hiked by 75 cents per litre, while diesel has gone up by 70 to 73 cents a litre.
This has increased the inland price of 95 petrol from R22.49 per litre to R23.24 per litre.
The increase followed increases in the average international product prices for Petrol, Diesel and Illuminating Paraffin, while the rand also weakened against the US dollar over the period.
The increase in fuel prices will deal a further blow to consumers who are already battling increased interest rates, high inflation, and growing costs.
“With no end in sight to the volley of living cost increases aimed at them, and with consumers already cutting back as much as they can, the latest petrol price increase will cut deeply into the little disposable income people still have left – making it nigh impossible for the majority of South Africans to make it through the month,” said Neil Roets, CEO of Debt Rescue.
“Yet, somehow they are expected to make do. This is deeply concerning.”
Roets added that a decline in personal disposable income is a major red flag, as it usually leads to a rise in household debt.
“Consumers need lower inflation and lower interest rates. The former is key because most of household spending is from disposable income,” he said.
In the latest Altron FinTech Household Resilience Index (AFHRI), economist Roelof Botha said that the severe pressure that South Africans find themselves in is due to the restrictive monetary policy adopted by the South African Reserve Bank (SARB).
The ratio between household disposable income and household debt costs has been the worst-performing indicator.
“After increasing consistently since 2016, this ratio took a hefty knock in Q2 2020 induced by the COVID-19 lockdowns, but then quickly recovered to a multi-year high. The reciprocal of this ratio, i.e, debt costs to income, has risen from a low of 6.7% in Q4 2021 to 8.9% Q3 2023 – an increase of some 33%,” Botha said.
Looking more positively, Botha said that lower interest rates will almost definitely lead to a new growth trend in the AFHRI.
However, the lingering effects of higher debt levels and subdued wage growth will be felt during the first six months 2024.