South Africa’s fuel prices are to increase again on Wednesday and are projected to continue climbing, leaving the country’s cash-strapped consumers with little to no wiggle room.
The latest fuel price announcement is based on the shortage of diesel supply as the OPEC+ member states cut production from November because of the “uncertainty that surrounds the global economy and oil market outlooks”.
The Organisation of the Petroleum Exporting Countries (Opec) and non-Opec partners is a cartel consisting of the world’s major oil-exporting nations.
Higher fuel prices lead to higher inflation, which often results in increases in interest rates, but the direct and more immediate result of rising fuel prices is increased pressure on consumers.
Casparus Treurnicht, a portfolio manager and research analyst at Gryphon Asset Management, said the oil price was just below $95 a barrel, an increase from $89.79 last week.
“We’re going to see inflation stay high, we’re going to see disposable income remain under pressure,” said Treurnicht. “There is a big part of the population that is very, very irritated.”
The latest Household Affordability Index by Pietermaritzburg Economic Justice and Dignity showed that for September, a basket of nutritional foods cost R4 805. A basket contains 44 food items and feeds about six people.
Month-on-month, the average cost of the basket increased by R30.28 (0.6%), from R4 775 in August, while year-on-year, the basket increased by R586.39 (13.9%), from R4 219 in September 2021.
Shopping around for deals is one way of easing the cost of groceries, but data from The Outlier, an independent publication using data to tell public service stories, shows that even shopping at the country’s lowest priced retailer for the month (Shoprite), instead of the highest (Spar), will not amount to a saving of even R50.
According to The Outlier’s data, Spar was the most expensive retailer for the month of October, followed by Pick n Pay, Woolworths and Checkers. Shoprite was the cheapest.
The basket used to cross-reference food costs comprises a loaf of white bread, two litres of sunflower oil, 2.5kg of maize meal, 2kg of rice, 2.5kg of flour, 2.5kg of sugar, two litres of milk, 175g of bath soap and a nine-pack of toilet paper.
The goods cost R428.91 at Spar and R384.91 at Shoprite, a difference of R44.
“Consumers are definitely under pressure and are trading down. Food inflation is high right now and I don’t think it’s going to stop soon, we are seeing signs that it might continue to go up even further,” Treurnicht said.
Consumer inflation is at 7.5%, according to Statistics South Africa.
Treurnicht said that competition is very aggressive in the retail sector because the retailers have to keep selling to consumers, who are under pressure, and at the same time buy from producers, who are also under pressure. “In a nutshell, it’s a perfect storm.”
Retailers such as Shoprite “are aggressive in terms of sourcing products and they are also very aggressive in terms of selling products. By that I mean they always try to keep the prices below their competitors and so they are in a better position [in terms of capturing the consumer wallet] than Spar, Pick n Pay or Woolworths and I don’t see that changing soon,” he said.
On Wednesday, the price of unleaded petrol (93 and 95), will increase by 51 cents a litre, while diesel will rise by R1.43 a litre. In Gauteng, 95 unleaded petrol will cost R22.87 a litre. Illuminating paraffin will increase by 77 cents a litre, the department of mineral resources and energy recently announced.
“The high demand and continued low supply of diesel led to a higher increase of diesel prices compared to petrol,” the department said.
As the cost of living steadily increases, salaries and wages have barely risen at the same rate.
The Old Mutual Group’s bi-annual 2022 Salary and Wage Survey shows that employers in the private sector expect average wage increases of 5.4% to be awarded in the next rolling 12-month period — below the inflation.
For public servants, the government’s final offer is a 3% wage increase this year.
The latest data from payments clearing house BankServAfrica shows that the average nominal salary recovered slightly, increasing by 2.4% to reach R15 063 in September compared with a revised R14 711 in August.
But fewer salaries were paid during the month, suggesting some job losses in the struggling economy, Shergeran Naidoo, BankservAfrica’s head of stakeholder Engagements, said in a note.
Naidoo said salaries have lagged behind the average headline inflation in 2022.
Economists have said that inflation is expected to trend downwards in October and November. But any declines in the latter month will probably be dulled by higher fuel prices.
