Prepare for a Spate of Price Increases in April

Fuel Price Increases

April is set to be a grim month for consumers, who can anticipate a spate of price increases. This month, electricity tariff, repo rate and fuel price increases will take effect.

Including a 30c fuel levy increase, petrol will go up by up to 83c per litre‚ while diesel will rise by 95c per litre, said the Automobile Association of South Africa (AA) on Wednesday. Moreover, the national energy regulator (Nersa) has approved a tariff hike for the Transnet petroleum pipeline system, adding a further 5.4c to the petrol price from Wednesday.

Having gone from slightly below $30 to slightly below $40 a barrel during March, the climbing oil price is to blame for the greater part of the petrol price increases, said Ian Cruickshanks, chief economist at the South African Institute of Race Relations.

“You might say; ‘well, it’s only another $10’, but that pushes up the price by 30% so it’s a massive increase, albeit from a low base,” he said. Regrettably, this hefty increase will cancel out the negligible gains the rand made against the dollar in the last few weeks.

Electricity Tariff Hike

What’s more, the electricity price increases by 9.4% next week. This will add over 1% to the inflation suffered by low-income households and cost the economy over 5000 jobs Nersa said.

“It only applies to direct Eskom customers from April. The rest of us will get the increase from July,” said economists.co.za chief economist, Mike Schüssler. Municipal power users will pay a slightly higher tariff, he added.

“An average family of four will have to add at least R200 to their electricity bill,” Schüssler said.

Food Inflation  

At the same time, inflation will carry on tormenting consumers. In February, food inflation was at 8.8% revealed Stats SA.

Potato price increases have hit an all-time high said Cruickshanks. There is currently a 3 million tonne deficit in the harvest in comparison to 2015 mostly due to drought, according to the South African Crop Estimates Committee.

“The price of vegetables is up by 21% year-on-year. All that means is that consumers are going to have a lot less money to support the retail industry… I think there are going to be a lot of hungry people. Hungry people get angry, and angry people protest,” said Cruickshanks.

In February, Stats SA recorded that alcohol and tobacco prices increased by 7.6% year-on-year, after the 8.3% January hike. However, the 6 – 8.5% sin tax coming into effect this month is certain to compound inflation-related increases.

Interest Rate Hike

To add insult to injury, the Monetary Policy Committee’s (MPC) 0.25% interest rate increase will come into force in April.

Another issue for those who have been granted salary increases will be that of being pushed into a higher tax bracket. Accordingly, they won’t get the tax breaks they would have qualified for.

“The inflation numbers are going to be very interesting in April. Because in February, we get the medical aid increases. In March, we get the school fee increases. I suspect we’re going to see much higher food inflation in April. I can’t predict the future, but just looking at my month food bill, food prices are going up quite sharply,” said Schüssler.