Motorists can breathe a sigh of relief this week with petrol and diesel prices seeing a substantial drop in the price from Wednesday, 4 January. However, households will remain under pressure due to high food costs, analysts warn.
Petrol prices will be coming down by R2.06 per litre from midnight, while diesel will see a drop of between R2.81 and R2.69 per litre from 50ppm and 500ppm, respectively.
This means a litre of 95 unleaded petrol will cost R21.40 inland and R20.75 on the coast.
According to the Department of Mineral Resources and Energy, the main reasons for the fuel price adjustment were an average Brent Crude oil price decrease from $88.77 per barrel to $85.08 per barrel during the period under review. Oil prices also continue to drop, in response to fears of a global economic recession.
However, despite the welcome relief on the petrol front, prices remain elevated and above R20 a litre – and this is exacerbating an already high cost of living for millions of South Africans, largely driven by high food price inflation.
According to the latest food inflation brief from the Bureau for Food and Agricultural Policy (BFAP) food prices in South Africa remain at elevated levels, and consumers should expect higher prices going into 2023.
“We expect that food inflation could peak in the first quarter of 2023, after which the higher base effects apparent from March 2022 will result in smaller inflationary effects during the rest of 2023,” it said.
CEO of Debt Rescue Neil Roets said that although any financial relief is good news for South African consumers, it is small comfort to the millions of families who are heading into 2023 in a far worse position financially than in 2022.
“Food prices remain at distressing levels for the average consumer, and the prices, especially of staple foods, continue to rise, regardless of decreases in inflation, petrol or diesel prices – with authorities either unable or unwilling to elucidate this continuing trend.”
Roets noted that severe petrol price increases in 2022 led to many secondary inflationary pressures, which have added up over the months. However, when the petrol price drops, relief in the same measure is not felt along the supply chain.
“With each petrol price increase in 2022 we have seen the second round inflationary pressures add up and hit consumers with a cost of transport increase, in addition to the increase that is passed on from retailers who need to transport food to their stores.
“Yet, previous drops in fuel prices during 2022 did not see a subsequent drop in food prices. In fact, food price inflation went in the opposite direction,” Roets said.
The BFAP noted that food inflation would likely remain high over the next three months as the full effects of persistently increasing commodity prices and weaker exchange rates filter through to retail markets.
It said that the two variables that should be monitored to gauge inflation rates during 2023 are global maize prices and the ZAR/USD exchange rate.
“South Africans have tightened their belts down to the last notch, and now there is nowhere to go,” Roets said. “This is especially concerning in light of other factors like the interest rates, which have been on an upward trend and will likely remain high for the foreseeable future, while the Reserve Bank keeps a close eye on inflation.
The effects of rate hikes are only felt after six or nine months, he said, “so consumers cannot expect any respite here either”.
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