Loadshedding affects household spend as further food price hikes loom
While a year ago, we may have laughed off the possibility of a stage six loadshedding as a hyperbolic jest, today it has been our lived experiences for weeks on end. According to Institute for Risk Management South Africa’s (IRMSA’s) Risk Report for 2022, load-shedding causes economic losses of about R700 million per stage per day to the South African economy. It has also been estimated that load-shedding has resulted in the loss of more than one million jobs. As a result of this energy-threat situation, IRMSA warns that a decline in productivity and plant availability, slow progress on unbundling, prohibitive costs of alternatives, and poor capacity could significantly impact economic growth, social cohesion, and service delivery.
These major economic blows are bound to be felt directly in our pockets as further food prices hikes loom. The largest alliance of agricultural organisations in South Africa, AgriSA, said a threat to food security in the country alongside other serious economic implications on the agricultural sector would be the only consequence from the ongoing power outages. Agri SA Executive Director Christo van der Rheede said in a statement that an intensification further than stage 6 levels would be disastrous and could endanger country’s national security.
“While some farmers have the means to move away from the power grid, most are unable to do so. This is especially true for the most vulnerable small-scale farmers. Farmers forfeit their water quotas for irrigation purposes when the power is off – an irrecoverable loss that paralyzes farms,” said van der Rheede.
“Farmers are already reporting huge losses as processing machinery, irrigation equipment and other machinery are damaged and come to a standstill due to power outages. With essential systems unavailable during the day, farm workers are required to work after hours. Such overtime wages increase production costs which are already increasing,” said he said.
In the current economic climate, South Africans are already under immense financial pressure. Over the past few months, the Ukraine-Russia war, stock market crashes, and COVID-19 pandemic have all contributed to rising food and fuel prices. As salaries haven’t grown at the same rate as inflation for many years, families and individuals are quickly running out of ways to make it through the month.
This phenomenon has resulted in overwhelming debt burden for consumers with the overall debt to annual net income ratio across all income bands reaching its highest level. Founder and Debt Counsellor at National Debt Advisors Sebastien Alexanderson said, unsecured credit is still a trend among consumers, indicating that they are using credit simply to get through the month. He said using credit cards this way only results in increased consumption and further debt.
“Having experienced a pandemic hiatus, interest rates have now climbed, and millions of South Africans are trapped in a vicious cycle of debt. With impossible loadshedding, a crippling economy, and now an impending food crisis, South Africans are finding themselves in an even dire circumstance,” said Alexanderson.
If you are also feeling the pinch of this crippling economy, contact NDA today, let us help you sort through the financial rubble that many have found themselves in.