South African consumers are bracing for a double blow in April with the petrol price expected to rise sharply, while a 25 basis-point hike in interest rates also comes into effect.
Worse still, Eskom has been given the green light to raise electricity tariffs by 9.4% in April.
Inflation hit 7% year-on-year in February from 6.2% in January, data from Statistics South Africa showed on Wednesday, the highest rate since May 2009.
“Today’s surprisingly high inflation figure will probably lead the South African Reserve Bank to accelerate its programme of rate hikes,” Capital Economics’ Africa analyst John Ashbourne told Reuters.
“This will be very painful for an economy that is struggling to avoid recession.”
The Reserve Bank raised its repo rate by 25 basis points to 7% last week, following a 50 basis points hike in January.
“This kind of inflation can certainly give some vindication to the SARB’s prior decisions to hike interest rates and also gives them some justification to follow through with further consecutive hikes. Our official view remains for a further 25 basis points at each of the next two meetings,” Mohammed Nalla, head of strategic research at Nedbank Group told Bloomberg.
Also on Wednesday, the Institute of Race Relations (IRR) warned motorists to prepare for a petrol price increase of between 70c/l and 80c/l in April.
IRR chief economist Ian Cruickshanks warned that if the rand and oil prices remain at their current levels, the fuel price could increase by 41c/l in April. That would be in addition to the 30c/l increase in the fuel levy that also takes effect in April.
“(This) could see motorists paying between 70c/l and 80c/l more for fuel,” he said.