Cash crunch for consumers as interest rate and fuel price hikes forecast by economists

By Yogashen Pillay

Durban – Economic experts expect another interest rate hike to be announced today.

The predicted hike comes as unaudited data from the Central Energy Fund suggests there will be fuel price increases announced next week.

Professor Bonke Dumisa, an independent economic analyst, said it was highly likely that the Reserve Bank would increase the interest rate by at least 50 basis points.

“Unfortunately, inflation is at 7.2% and that is way above the target of 3-6%, so an interest rate hike will be necessary.

“We have had three consecutive increases of 75 basis points and unfortunately, another 50 basis points interest rate increase won’t bring any relief to the consumer.”

Dumisa added that there could be more interest rate hikes this year.

Dr Sheunesu Zhou, an economist from the University of Zululand, agreed that an interest rate hike of about 50 basis points was expected.

“We can expect another interest rate hike of at least 50 basis points. This will undoubtedly have a negative impact on the economy. Most consumers have credit and they can expect to be paying more.

Those who have housing bonds, and car finance will be feeling the biggest impact as they will be paying more for debt.”

While the interest rate hike would discourage consumers from taking on loans, those already heavily indebted were going to suffer, Zhou said.

Neil Roets, CEO of Debt Rescue, said that he expected an increase in the interest rate of at least 25 basis points.

“There are other experts who said it could be a 50 basis point increase but it doesn’t matter, any increase will still have a devastating impact on the consumer. There are businesses that are struggling to survive because of the Covid-19 pandemic, load shedding and electricity price increase and this will make things worse for them. Prices of goods will go up, unfortunately salaries can’t go up at the same level.”

Roets added that they had noted a big increase in the number of people seeking debt counselling.

“Compared with the same time last year we have noted a dramatic increase in the number of people seeking assistance. This is a big concern as it means there are a lot of consumers in debt but on the other hand it’s a good thing as it means South Africans are aware that help is available.”

IOL reported on Monday that unaudited data from the Central Energy Fund suggested fuel price increases next week with hikes of around 25 cents for 95 Unleaded petrol and 32 cents for 93 ULP and increases of between 5 cents and 40 cents for diesel.

Professor Irrshad Kaseeram, of the University of Zululand’s economics department, said that global oil prices had been volatile due to an economic recession expected in the US and Europe.

“Moreover the shifting prices have also been buoyed by the opening of the Chinese economy where demand is expected to rise. Many analysts expect prices to rise over the next three months.

“February’s petrol prices are expected to rise between 25 and 32 cents if volatility is subdued, however, it could rise as much as 70 cents if there are big price jumps over the next week. The diesel price is expected to rise by 5 cents a litre. However, if there are huge price swings this rise could climb to 40 cents.”

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