The price of everything is going up in SA

 ·19 Jan 2016
Money Rand

Having lost over 30% of its value against the dollar in January, the weak rand is causing everything to go up in price – from food, to medicine, to technology.

According to economists, South Africans should prepare themselves for a tough year in 2016.

Notably, retail bank Absa expects inflation to hit 7.3% in 2016 – far above the 6.0% maximum set by government.

Reports from various industries have laid out the damage done by the weak rand. This is what you can expect:

Food prices are going up

An ongoing drought in South Africa is severely affecting food producers in the country, forcing us to import staple foods at higher prices.

According to reports from food producers, food prices are expected to increase by at least 10% by the middle of the year.

This is expected to get even worse by April 2017, where food prices will be 25% higher.

Medicine will cost even more

Another victim of high import prices, medical aids and consumers will be left with emptier pockets with the price of medicine expected to increase this year.

Medicine prices are tightly regulated, and there is often only room for one increase per year – but with the rand causing strain in the market, another hike is coming.

The department of health is planning to allow pharmaceutical companies an extra price increase later this year, and has promised to speed up the application process needed to adjust prices.

Software and technology prices already hit

A sector that is highly dependent on the the rand/dollar exchange is the tech sector – and things are not looking good.

Apple has already hiked prices in the local app store to reflect the weak rand, and software prices in the country have already increased by 40%

And this is going will continue to rise as the rand weakens, the industry has warned.

Petrol price likely to climb

Global oil prices have dipped below $30 a barrel – typically this would be good news, resulting in a drop in fuel prices.

However, as the rand remains stubbornly weak, it is doubtful that the oil price reprieve will have any significant positive impact on petrol prices.

Senior researcher at Solidarity Research Institute, Paul Joubert, said that the current outlook for fuel prices is that the price of 95 octane petrol will rise by about 8 cents per litre on 3 February, while 93 octane will rise by approximately 5 cents.

Drivers of vehicles that use diesel should see a price reduction, however.

Electricity price hike coming

While not tied to the rand, directly, the cost of electricity is expected to shoot up in 2016.

Power utility Eskom is currently appealing to the National Energy regulator of South Africa for permission to hike tariffs by 16.6% to recover over R22.8 billion in lost revenue.

While the public hearings on the matter are still ongoing – and there is strong opposition to the full amount – some increase to tariffs is likely to be granted.

Housing market is slowing down

According to Absa, there is one sector that will experience a drop in prices in 2016 – house prices. But that’s not necessarily a positive sign.

The group’s latest assessment of the property market shows that, with the current inflation outlook in the country, there will likely be real house price deflation over the next 12 months.

This reflects larger macroeconomic trends, it said, with subdued demand for housing, which will damped demand for housing finance.

More on the economy

Get ready for a food price shock in 2016

South Africa recorded the driest year in over a century

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