Shock petrol price hike to wallop worn-down wallets
Already burdened by rising food prices, high electricity costs and crippling debt, consumers will this week have to submit to a massive increase in the fuel price.
And paying at the pump could get even more painful in the coming months.
The price of all grades of petrol will be raised by 93c a litre after midnight on Tuesday and diesel will go up by 69c.
This will be the highest petrol price increase in the country's history, according to statistics on the Automobile Association's website.
It will also wipe out all the relief gained from two price-cuts earlier in the year.
There is more bad news:
- Food inflation is on the rise because of a drought in the US that is affecting its maize production and stoking prices around the globe;
- Electricity prices have jumped and Eskom is likely to increase its charges further as it tries to finance its massive capital investments;
- Household debt is still high, though interest rates are at a record low.
The sharp increase in unsecured lending this year is worrying both economists and the government.
Credit data released by the Reserve Bank last week showed that non-mortgage lending grew by 21.2% year-on-year, a sharp climb in unsecured lending.
"This would appear extreme given the current mediocre state of the economy," said economist John Loos.
Last week, Finance Minister Pravin Gordhan met banking bosses to make sure that they do not leave this form of credit unchecked.
The Consumer Financial Vulnerability Index - released earlier this month by MBD Credit Solutions and the Bureau of Market Research - revealed earlier this month that consumers experienced severe strain on their cash flow during the second quarter of the year. The index fell sharply from 58.9 to 48.6 points, meaning that consumers slipped from a "mildly exposed" cash-flow position in the first quarter to being "very exposed" in the second, according to the research bureau.
A weak rand could make matters worse.
Trade data late last week revealed that the rand might fall further.
In July, imports exceeded exports for the seventh consecutive month, registering a deficit of R6.7-billion, from R5.7-billion in June.
"We forecast a current account deficit of 4.7% of GDP this year compared to 3.3% last year," said Nedbank economists Isaac Matshego and Dennis Dykes.
A large current account deficit would raise doubts about the sustainability of South Africa's economic growth and usually spooks investors, jeopardising economic growth.
This could make the rand slide further, ultimately making fuel even more expensive.
The rand has lost 28% against the dollar this year.
Over the past month, the price of Brent crude oil has increased by $11 to more that $110 a barrel, the Department of Energy said.
Turmoil in the Middle East would probably support the oil price at these levels, making petrol price relief unlikely.