South Africans are being pressed from every angle. Aside from the increases in fuel, food, and power prices, as well as the large interest rate increases, airline tickets increased by 30% this year, owing in part to the high fuel prices, but also because Comair (the operator of kulula.com and BA in South Africa) went bankrupt and the supply of seats suddenly shrank. Imported automobiles, vehicle supplies, and equipment, including telephones and other technology, became more expensive as the rand fell. Inflation is expected to fall to 5.4% in 2023, down from about 8% earlier this year, according to the Reserve Bank. Yet, this just implies that prices will rise at a slower rate than this year. Interest rates may continue at these excruciatingly high levels for some time.
Electricity: Eskom has requested a 32% rate rise for next year, owing in part to substantially more expensive fuel (from April). Eskom warned in November that it had run out of funds to purchase more diesel, which powers its emergency plants. The tariff application is now being reviewed by the regulator, the National Energy Regulator of SA (Nersa). Eskom requested a rate increase of 20.5% for 2022, but only received 9.61%. Yet, power costs are expected to rise above inflation again next year. It plans to make its decision in December. Record load shedding has its own set of expenses. Households must pay for everything from extra candles and fast food during power outages to gas and generators. Significantly, firms are raising their pricing.
Fuel prices: The rand has suffered as investors sell developing market currencies and run to the protection of the US dollar over the Ukrainian conflict, but also as fears of a global recession mount. Furthermore, the United States has been actively raising interest rates. As investors receive greater interest rates on dollar investments, the rand loses its allure. The price of oil has lately fallen as a weakening global economy affects on demand. This has helped to reduce the price of fuel from R26.70 a litre (in Gauteng) in July to R22.87 – still much higher than R19.54 a year ago. Petrol prices continue to be exorbitant. Diesel was R17.20 per litre a year ago, but it skyrocketed to R25.49 per litre in November – a 25% increase.
Food prices: Food costs reached new highs as a result of higher fuel prices and the direct impact of Russia’s invasion of Ukraine on wheat, maize, and sunflower oil prices. Grain prices rose throughout the world as Ukraine’s exports were hampered. Ukraine and Russia contribute for around 30% of global wheat exports and 20% of global maize exports. South Africa imports almost one-third of its wheat from Ukraine and Russia. South African bread and cereal costs have climbed by nearly 20% this year. World cooking oil prices also soared in response to the invasion of Ukraine, which interrupted vital Black Sea region sunflower oil shipments. Data show that a 750ml bottle of sunflower oil cost more than R45 in July, up from less than R31 the previous year.
Interest rates: South Africans with house loans and other debt have been hammered hard by massive interest rate increases, with the prime rate rising from 7% to 10.5% in a year. This increased monthly payments by about R4 500 on a new R2 million house loan at the prime rate. Analysts anticipate another 50 basis point rate rise in January. This might be the final boost in this sequence, but rates are unlikely to fall anytime soon. The SA Reserve Bank only anticipates inflation to “sustainably” return to its target of 4.5% by the second quarter of 2024. It is unlikely to decrease rates until inflation reaches these levels. To combat inflation, the bank is raising interest rates. consumer price index (CPI for all urban areas) below: