Fuel Price Likely To Be Temporary – Expert

The expected 22 cents a litre decrease in the petrol price next Wednesday and a eight cents projected decrease for diesel will bring some relief to deeply indebted consumers.

But this will likely be offset by the drought plaguing grain producing regions, which would lead to significant increases in basic food prices, said Debt Rescue CEO Neil Roets.

And a weakening currency may mean that the lower fuel price might also be shortlived.

The announcement this week that unemployment had increased by half-a-percent to 25,5% was another indicator that it was belt-tightening time for consumers, Roets said in a statement yesterday.

A combination of economic factors was going to severely impact consumers, many of whom are already deeply indebted.

“Massive unemployment coupled to the fact that most consumers owe more than 75 % of their monthly salary to financial institutions means the situation is dire to say the least,” he said. Independent economist Dawie Roodt said consumers could be in for further price shocks as the local currency continues to slide against other major currencies.

He said the so-called “expanded” unemployment figure, which includes workers who had stopped looking for work, was probably closer to 40%.

“There is no way to put a positive spin on these figures. The country is broke, consumers are broke and even slight price adjustments in the cost of basic necessities such as food have a major impact on the poorest of the poor,” said Roodt.

“The drop in the fuel price will almost certainly be temporary, because the short-term outlook for the local currency remains problematic and we may well be looking at a fuel price hike before the end of the year,” said Roodt.

The weakening financial position of consumers was also evident from the latest EY/Bureau for Economic Re-search (BER) Retail Survey, which showed a substantial deterioration in trading conditions in the third quarter.

EY Consumer Products & Retail sector leader Derek Engelbrecht said that business conditions in the retail sector continued to deteriorate, despite a decline in fuel prices and the respite from load shedding.

The survey results suggested that sales volume growth had slowed more than retailers had expected, even though they had tried to contain price increases by cutting profit margins.

“With selling prices set to increase in the fourth quarter — adding to the strong headwinds already battering the consumer — most retailers expect weak sales volume growth during the festive season!’ said Engelbrecht.

The majority of the retailers surveyed in all three sub-categories — durable goods, non-durable goods and semi-durable goods — reported a marked slowdown in sales growth and a slump in overall profitability levels during the third quarter.

Food inflation, which had surprised on the downside in recent months, may rise substantially in the final quarter, he said.

Roets said his company was seeing double digit increases in its growth rate, largely because of the growing number of deeply indebted consumers seeking relief by going under debt review.

“Debt counselling remains the best way for consumers to manage their debt load by negotiating with creditors and paying off debt in smaller instalments over a longer period!” said Roets.

“None of their assets may be attached by debt collectors while they are under debt review!’ he said.

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