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Wed Jul 27 09:46:31 SAST 2016

The noose tightens for consumers

Shaun Smillie, Graeme Hosken and Bianca Capazorio | 02 March, 2016 06:26
shopping, market, grocery, shops, consumer, shopping, supermarket
The poultry association's Charlotte Nkuna said the retail price for South Africa's most popular chicken - 2kg quick frozen bags - had already increased by about R7 from R45.60 in the last quarter of last year to R52.28 this quarter. File photo
Image by: SIPHIWE SIBEKO / REUTERS

As the economy is squeezed from all sides, consumers are digging deep into their savings to maintain their lifestyles.

Yesterday that squeeze tightened, with Eskom allowed to increase its tariffs by 9.4% from April 1, warnings that meat and egg prices are to rise dramatically and DStv hiking its subscription fees.

The Eskom tariff hike comes barely a month after the SA Reserve Bank raised interest rates by 50 basis points to counter rising inflation and the slump in the value of the rand. The rate hike lifts the cost of outstanding home loans and other credit.

Economist Azar Jammine said inflation was expected to rise to 8%, forcing the Reserve Bank to hike rates further - and that President Jacob Zuma's tinkering with the finance ministry was partly to blame.

"We should be thanking him for some of this pain because if he hadn't fired [former finance minister Nhlanhla Nene] the rand would still be at R14.50 to the US dollar and inflationary and interest rate prospects not as bad."

He added that, though the doom and gloom was expected to continue for a long time, South Africans would absorb it.

"They did so over Christmas despite our warnings to drastically cut back on spending. This was seen with a retail industry sales growth of 4% occurring.

"The result is that there has been an increase in unsecured lending by households to help keep their living standards going. People are obviously not saving because interest rates are too low and people are rather going out spending."

But their spending might be curtailed by the increases.

Now that the National Energy Regulator of SA has ruled that Eskom gets a 9.4% tariff increase, the race is on for municipalities to structure their own increases by July 1.

The increase means Eskom would, through the tariffs, raise R11.241-billion. Eskom hoped it would raise R22.8-billion with a 16% tariff hike.

Nhlanhla Ngidi, the energy specialist at the SA Local Government Association, said the challenge would be for municipalities to meet the July 1 deadline in a process that not only requires crunching numbers but also organising public hearings and presenting tariff increases to Nersa.

The municipalities are likely to pass on some of the Eskom tariff increase to ratepayers.

But while the association welcomed the increase of only 9.4%, the Consumer Goods Council of SA warned that even this lower rate would affect the economy.

"This increase, well above the rate of inflation, adds significantly to financial pressures facing consumers and puts additional pressure on business too," said the CEO of the Consumer Goods Council of SA, Gwarega Mangozhe.

Consumers can also expect to be hit by the cost of essential protein sources such as chicken, eggs and red meat, which look set to increase dramatically.

Meat producers briefed parliament's portfolio committee on agriculture on the impact the drought was having on them.

Andy Crocker of the SA Poultry Association said when the economy was strong, consumers could be relied on to "fund" the drought. But he said "the consumer cannot carry the cost of the drought".

The poultry association's Charlotte Nkuna said the retail price for South Africa's most popular chicken - 2kg quick frozen bags - had already increased by about R7 from R45.60 in the last quarter of last year to R52.28 this quarter.

Pieter Prinsloo, vice-chairman of the Red Meat Producers' Organisation, said though it was impossible to determine future prices, beef prices were expected to rise by 12%-14%.

Chairman of the SA Pork Products Organisation, James Jenkinson, said it expected the price of pork to increase by about 25% this year.

And consumers will pay at least 8% more for DStv subscriptions from April 1.

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