Consumers will be digging deep into their pockets for petrol and electricity as prices soar to their highest in spite of household income being impacted by the Covid-19 pandemic.
The petrol price breaches the R17 mark today for the first time since late 2018, following hikes of 95 cents and R1 per litre for 93 unleaded and 95 unleaded, respectively.
The depreciation of the rand against the US dollar, from R14.76 to R14.95, led to higher contributions to the basic fuel prices of petrol, diesel and illuminating paraffin. This comes as stiff electricity tariffs kicked off on Thursday after Eskom was granted permission to increase the rate of tariffs by 15.63 percent from April 1.
This means an additional 5.44c/ kWh to the standard tariff for Eskom customers for the 2021/22 tariff year, making the aggregate average standard tariff of 134.39c/kWh. The latest research from the National Credit Regulator pointed out that almost half the 27 million credit active consumers in South Africa were in arrears.
Debt Rescue’s Neil Roets said these increases were likely to push consumers further in debt following a long Easter weekend of travelling and spending.
“These increases, as well as the weakening rand are definitely no joke, and those consumers who are already embattled with high costs of living will feel this in their pockets this month,” Roets said.
Economists warned early in the year that a surge in global oil prices, coupled with a weaker rand and the introduction of fuel taxes would mean increased costs at the pumps.
The price of oil per barrel has risen more than 30 percent so far in 2021 as demand picked up on global economic recovery.
Momentum Investments economist Johann van Tonder said the impact of the double price hike of fuel and electricity prices might see an upward swing in consumer price inflation (CPI).
Van Tonder said CPI would really accelerate from April onward on the back of a low base and higher food and fuel prices, with a possible increase to higher than 5 percent subsiding.
“(However), it is not yet possible to calculate the exact impact of higher fuel and electricity prices on CPI as, for example, municipalities must still decide on the tariff increases they will pass on to consumers,” he said.
Old Mutual’s chief economist Johann Els said it was not all doom and gloom as a favourable CPI basket would offset the increases in fuel and petrol prices.
Consumer prices slowed to an eight-month low in February as demand continued to be depressed by the Covid-19 pandemic.
Core CPI estimates for 2021, 2022 and 2023 respectively are 3.3 percent, 4 percent and 4.3 percent.
Els was upbeat on the overall impact on consumer spending as the economy was likely to experience a strong recovery this year.
“The overall CPI-basket is still muted as food prices, medical aid insurance tariffs, school fees, and property rentals are easing off quite a bit,” Els said. “Overall, the consumer basket will stay muted at around 4 percent this year despite the fuel increase. This year will be far better for consumers than last year.”
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