Fuel, energy hikes push up grocery bills

SOUTH Africa’s spiralling fuel and electricity prices are set to deepen the financial crisis households face because wage and grant increases are not keeping up with the pace of the rising cost of living.

Higher fuel and oil prices will also put pressure on farmers who face rising input costs; and logistics firms will be forced to increase fees which will impact on food prices, economists and consumer groups have warned.

The price of 95 octane petrol rose by R1 a litre to R17.08 inland and R16.49 at the coast on October 10, while the price of 50ppm diesel increased by R1.24 to R15.69 inland and R15.21 at the coast. Petrol and diesel are now R3 and R4 more expensive per litre than they were in March.

Consumers can also expect to pay more for electricity after the National Energy Regulator of South Africa (Nersa) granted Eskom a 4.1% increase which will be effective from April next year.

Nersa is also considering Eskom’s request for a 15% tariff hike, which if approved, will be effective in the same month.

But consumer experts and economists have raised concern that food prices, which in recent months have been stable, because battling households have already cut spending, could now rise sharply on the back of the string of fuel price hikes.

FNB Agri-Business senior agricultural economist Paul Makube said higher fuel prices would hurt consumption growth in a weak economy.

“The SARB earlier indicated that household consumption has already fallen by 1.3% in the second quarter of 2018 as spending on goods declined, particularly durables which were down 11.2%.

“Small business and poorer households will bear the brunt as their transport costs account for a large portion of household expenditure and the consequence of sustained fuel price increases will further erode disposable income and cause financial stress. This will force a change in spending patterns with a cut in spending on luxury items and frequency of visits to eateries,” Makube said.

The higher crude oil price, he said, which has breached the $80 per barrel level would also impact on indirect oil derivatives such as fertiliser, pesticides and herbicides which are inputs in crop farming.

FNB Agri Business head of marketing and information Dawie Maree said the hikes could also lead to the Reserve Bank raising interest rates at its next meeting in November.

Pietermaritzburg Economic Justice and Dignity researcher Julie Smith, said the organisation’s monthly Household Affordability Index had shown two consecutive months of food price inflation. High transport costs were having a crippling impact on poor households.

“The cost of the food basket in October is R3 038.50. This latest month the food basket increased by R18.22 (0.6% compared to the previous month),” Smith said.