Huge increase in taxes and tariffs means South African consumers face uphill task to make ends meet
WHEN workers opened their payslips at the end of last month, many of them had a nasty shock.
The new tax rates came into effect on March 1 and many workers found their tax deductions had increased at month end. The lucky ones who received a salary increase at the start of the new fiscal year found a large portion of the bonanza went to the taxman.
But that’s just one aspect of the whammy that will hit consumers this month. Electricity tariffs went up today, the 30c / fuel levy kicks in and fuel increases are expected to be announced today, for implementation on Wednesday.
To rub salt into the gaping wound, the latest factory gate prices published by Statistics South Africa yesterday showed the producer price inflation (PPI) for February 2016 skyrocketing to a whopping 8.1% year-on-year, from the previous 7.6%.
Month-on-month the rate clocked 0.8%. However, market expectations pencilled in an increase of 8.5%y/y.
As pain piles up, it is a signal of the possible onslaught of double-digit inflation sooner than expected. If inflation goes up, interest rates are bound to follow.
The PPI for February 2016 continues to rise faster on the back of the count rywide drought which will automatically push food prices higher.
According to Stats SA. food products, beverages and tobacco products, coke, petroleum, chemical, rubber and plastic products and transport equipment were the main contributors to the rise in PPI.
“PPI inflation is likely to continue to climb towards 10% in 2016, as its food price inflation rate runs in double digits. We expect consumer food price inflation in double digits, placing upward pressure on CPI. This will lead to further interest rate hikes,” Annabel Bishop, Investec Group chief economist, said.
Jannie Rossouw, the head of School of Economic and Business Sciences at University of the Witwatersrand, said it was disconcerting to see the increasing trend in the PPI.
“If this increase in the PPI spills over to the CPI and pushes up the rate of inflation, the SA Reserve Bank’s monetary policy framework will leave the central bank with no option but to increase interest rates further.”
I Ie said higher inflation put all South African consumers under pressure, but was specifically detrimental to poor consumers and pensioners.
Debt Rescue CEO Neil Roets said yesterday tough times were here and consumers needed to tighten their belts. “Prices of anything that is consumed by households is going up.”
Roets also advised consumers to know their rights as some credit providers will take advantage of consumers without following proper channels.
“In terms of the National Credit Act, credit providers must provide consumers with a Section 21 letter before taking any legal action that will result in consumers losing their belongings.”
