Consumers face another tough economical year ahead!

According to financial analysts, this year is going to be “much worse” than last year when strikes, widespread job losses and a weakening economy pushed up the the cost of essential items, forcing families to cut down on their spending or even take out loans.

Labour analyst Michael Bagraim said: “I have workers telling me they can’t afford to buy enough food for the month. There are just a few days until pay day, but many families are out of money. They don’t use electricity because they can’t afford to top up and they are scraping by on the bare minimum.”

The lawyer has about 1 000 small companies on his books and has been speaking to their employees to try to piece together a picture of the challenges faced by South Africa’s blue-collar workers.

“The message is clear: their salary is simply not enough to catch up with the hyperinflation we are seeing,” he said.

He cited a massive spike in the cost of maize products as one of the biggest contributors to the increased cost of the average food basket.

Drought in the Northern Cape, which has caused countless crops to fail, has driven up the price of white maize as stockpiles begin to dwindle.

Reports estimate that by the end of this month, consumers could be paying as much as 50 percent more for maize products. While not as severe, other commodities were also being marked up.

Bagraim said that while the upper-income bracket would be able to weather the storm, middle-to-low-income earners would feel the burn of rising food costs.

According to Bagraim, the short-term solution would be for the government to step in and subsidise essential food items; dramatically decreasing prices until the economy stabilised.

Failing that, he urged the government to make these groceries available VAT-free.

“This would come as little to no cost to the government but would be a relief for many families as it would counteract inflation,” said Bagraim.

But as households battle to make ends meet, another price hike is looming. Next month, petrol prices were expected to rise as much as 32c to around R13.50, AA spokesman Graeme Scala said.

This follows a 38c increase at the beginning of the year, which brought the price of a petrol to R13.20 a litre on the coast.

“It is by no means a huge increase, it is exactly what we have come to expect,” said Scala. “But we could see over a R1 increase in just the first three months.”

Last year, the petrol price rose by R1.31, from R11.51 a litre to R12.82.

Scala attributed back-to-back increases to a weakening rand/dollar exchange rate. He warned that if the rand stayed on this downward trajectory, the petrol price could rise to R14, R15 or even R16 a litre by the end of the year.

Ina Wilken, chief compliance officer for the Finbond Group, said petrol price hikes had a long-lasting impact for consumers: “Every time there is even just a rumour about an increase the cost of commodities goes up. Which is fine, except they stay there even when petrol goes down again.”

She said the slew of price hikes could not have come at a worse time. January was historically a tight month for most families, as most were either cash-strapped after the holiday season and had to buy school supplies for their children, or both.

There are even more increases on the horizon. As part of National Electricity Regulator of SA’s agreement with Eskom, the national power supplier will be increasing electricity tariffs by 8 percent in March.

This will be an annual occurrence, with three more 8 percent increases scheduled to take place over the next three years. The amount outstrips the annual rate of inflation – which is at about 6 percent.

DA spokesman for finance Tim Harris said many economic challenges stemmed directly from how the government ran the economy.

“Electricity, tolls and utilities – these have been increasing above the rate of inflation for years. The reality is that the government has to a degree control over them, so you can really lay this at their door.”

He said instead of building infrastructure, such as new power plants, or investing in production – the government dragged its heels. “As a result consumers are suffering now, and look to have a very difficult year ahead.”


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