Low-income consumers face tougher times

By Ina Opperman

The highest petrol price yet will increase prices of all goods, push up inflation and cause financial devastation for consumers.

With 95-octane petrol costing to a staggering R21.60 per litre and 93-octane R21.35 this month, the future looks bleak for consumers who already live on their salaries month-to-month.

Low-income consumers will also suffer the most as they already cannot afford nutritious food, while they will also have to pay more for transport to work and school. The long-term impact on inflation will also see even the middle class battling financially as higher interest rates follow, just as everyone starts to recover from the financial after-effects of the pandemic.

Jannie Rossouw, visiting professor at the Wits Business School. says the adverse effects of the jump in the price of petrol are already being felt as it will immediately push up inflation and transport costs.

Provinces such as the Northern Cape, where goods have to be transported over vast areas, will be worse off as goods will cost more due to increased transport costs.

“We could already see what the increases in the petrol price has done to prices over the past three months,” says Rossouw.

Food prices can also be affected by the war in Ukraine as oil seed and wheat exports are affected.

With the price of Brent crude oil spiking in the past week due to the war, prices can still increase.

Rossouw says the price is primarily determined by two factors: the price of Brent crude and the exchange rate.

“I think the price of Brent crude will stabilise at about $100 (about R1 550)per barrel and also expect the rand to remain stable. But consumers must remember that this is not a good time to make more debt as interest rates are also expected to increase. Rather build some reserve now.”

According to the mid-month petrol price data from the Central Energy Fund, petrol could jump to an unprecedented R25 a litre in the near term. “This is shattering news for consumers and it will lead to financial ruin for many people,” warns Neil Roets, CEO of Debt Rescue.

“More increases in the fuel price will inevitably affect every South African, given how much the country relies on fuel for transport, manufacturing and agriculture. Consumers have already been pummelled with a volley of month—on-month fuel price increases over the past year and now face the steepest one yet. How are they expected to cope with this?”

SA imports about 30% of its wheat from Ukraine and Russia and the war has pushed prices to their highest levels since 2008.

This means bread prices will increase making it even harder for low-income consumers to survive.

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