Economists and analysts fear the worst for the South African economy as the cost of living crisis spirals out of control for consumers in the country.
This comes after the South African Reserve Bank (SARB) Monetary policy committee (MPC) raised the repurchase rate by a shocking 50 basis points, which comes into effect in April.
Motorists eagerly awaited some reprieve following the announcement to come in the form of fuel price cuts. However, barring cuts on the diesel prices, petrol saw a minuscule decrease of 1c per litre, while the 95 octane grade inland saw a price increase.
Official figures showed last week that the retail price of 95 Octane petrol would increase by 2c per litre while 93 Octane petrol would drop by 1c.
CEO of Debt Rescue, Neil Roets, told Business Report, “The announcement by the Department of Mineral Resources and Energy (DMRE) of a marginal drop in the price of 93 Octane petrol is cold comfort for millions of South Africans who face a volley of price increases in April, not least of which the much-protested Eskom price hike of 18.65%, and a shocking repo rate hike of 50 basis points that has seen interest rates climbing to unprecedented levels.”
“While it is good news for owners of diesel vehicles that diesel prices will decrease by 73.58c per litre, only 37% percent of the country’s vehicle owners choose diesel vehicles over petrol vehicles. The price adjustments are largely determined by the oil price, as well as the status of the rand versus the US dollars - as oil is priced in dollars,” Roets further said.
He further said that while he understands the repercussions of global decisions like the announcement by Opec that they are cutting production of oil by about 1.16 million barrels per day, the resulting cost-of-living increases are decimating people’s lives.
“For the millions of South Africans buckling under the onslaught of monumental cost-of-living increases in April, there is no silver lining. The repo rate hike will increase borrowing costs for consumers and reduce their disposable income even further while pushing levels of debt even higher,” he says.
According to the latest Household Affordability Index released by the Pietermaritzburg Economic Justice & Dignity group (PMBEJD), food prices in South Africa remain stubbornly high, with warnings that the pressure at the tills will linger for longer.
The PMBEJD basket comprises 44 core food items most frequently purchased by lower-income households, who make up most households in the country. Thirty-eight items in the basket all saw a price jump in March 2023 – 24 of which were 10% or more. These are all staple foods that families need on a daily basis to combat malnutrition.
Andra Nel, purpose manager from KFC’s Add Hope, told Business Report that consumers would need to pay close attention to the prices of food and their finances.
“While there was a slight drop in prices on fuel consumption, which would be welcome by consumers, the reality is that there is a little bit more in the pocket, but it does not match what we are seeing from a food price inflation perspective. A rate of food inflation of 9.9% year-on-year is still a very hard element for consumers to manage. The household affordability index shows that consumers are paying almost R5000 for a basic food basket. It is important to be aware that this will affect the poorest of the poor, who are already struggling to make ends meet,” Nel said.
She further added: “While fuel is not directly related to the food basket, the reality is that food prices in South Africa will be an ongoing concern and an increasing factor when we consider that the country’s fight against food security continues.’’
BUSINESS REPORT