Cape Town – The projected increase in the petrol price of around 30 cents a litre is going to peg the fuel price at an all-time high of about R14.20 to the litre.
This is going to add to the woes of deeply indebted consumers, warned Neil Roets, CEO of Debt Rescue on Thursday.
The steep increase in petrol and food prices were the main reasons for the surprise spurt in the January Consumer Price Index (CPI) of 5.8% from 5.4% in December. Economists expected a rise in CPI to 5.7%.
Merina Willemse, an economist with the Efficient Group, told Fin24 this spells more interest rate hikes later on this year.
“For now we are forecasting another 100 basis points increase in interest rates for 2014,” she said.
Roets said the projected major increase in the petrol price in March could lead to many more South Africans falling into the debt trap.
The petrol price increased by 38c and 39c a litre respectively in January and February this year.
He said substantial numbers of consumers could be facing impaired credit records by being blacklisted.
“We have seen a substantial increase in the number of clients knocking on our doors, seeking relief by being placed under debt review.
“This is to some degree the result of the general increase in the cost of living, but the monthly increase in the fuel price is beginning to play a major role.”
Economist Dawie Roodt of the Efficient Group said if the rand does not deteriorate further, the petrol price for all grades would increase by between 30c and 33c a litre, while diesel would increase by between 25c and 26c a litre, taking both to historic highs.
Gina Schoeman, an economist with Citi Research, a division of Citigroup Global Markets, expects more upside for inflation this year.
“This would be due to upside pressure building in petrol – 39c/litre in February and a likely 26c/litre in March – and food and rand pass-through,” she said.
“By the first quarter of 2015 we believe that the 150bps in rate hikes that we are factoring in – 50bps in January, March and July, respectively – will be enough to push CPI back into the target range.”
Roets said according to the National Credit Regulator there are 9.76 million consumers with impaired records in SA.
That means they have accounts not paid for three months or more. Total consumer debt is now topping R1.44-trn, according to StatsSA.
Roets said rising food and fuel costs and slow economic growth are making it difficult for many South Africans to pay back their loans on time.
One in every four South Africans is unemployed and the number of borrowers with impaired credit records has risen to nearly 50%.