South Africa at breaking point

Households in South Africa have been hit by a “tsunami” of cost pressures, with the two biggest sources of energy now threatening to push many over the edge.

The cost of petrol and diesel have shot up dramatically from today (Wednesday, 6 September), increasing between R1.71 and R2.84 per litre, respectively.

This will add even more pressure onto households’ transport cost, but also to the operational costs of businesses and entire industries across the country that currently rely on diesel generators to mitigate the impact of load shedding.

With load shedding back at stage 6 – and not going anywhere – these energy costs are mounting. Groups like Shoprite have had to cough up over R1.3 billion in the past year to pay for the diesel to keep lights on.

Even when electricity is available, an almost 19% tariff hike from Eskom in April, and the 15%+ municipal tariff hike in July have escalated household power costs significantly, putting consumers under severe pressure.

According to Debt Rescue chief executive Neil Roets, households have reached their limit and are a breaking point.

“There absolutely has to be some respite for consumers soon, and this needs to come in the form of financial relief from Eskom and the Department of Mineral Resources and Energy. The financial tsunami emanating from these quarters is wreaking havoc on the lives of people across all income brackets, who are paying the price for maladministration, bad management and corruption,” he said.

The Automobile Association (AA) warned that the fuel price increases will have negative consequences for all consumers, not just motorists, as the higher transportation costs will inevitably filter their way through to general inflation.

“Motorists will certainly feel the pinch in terms of higher prices at the pumps but consumers across the board can expect higher prices to all goods and services because of these hikes,” it said.

Hugo Pienaar, chief economist at the Bureau for Economic Research (BER) said that the outsized fuel price increases will affect inflation.

“With outsized South African fuel price hikes in September, headline and core CPI are set to diverge again in coming months,” he said.

Roets said the country is locked into a vicious cycle that can only spell financial disaster for the average South African.

“We are seeing more people across the income spectrum relying on credit to get them through the month. There is also an increase in people defaulting on their debt,” he noted.

This is broadly reflected in the latest data from Eighty20’s Q2 Credit Stress Report, which showed that South Africa’s middle class increasingly cannot afford secured loans – or are defaulting on loans they have – as the ongoing challenging economic environment continues to add strain to monthly budgets.

This was also presented in the financial reports from the banking sector – which noted similar concerns around debt.

Standard Bank, Absa, Nedbank and Capitec all reported increased credit impairments in the most recent reporting period. The worst was African Bank, which noted that impairment charges on loans and advances grew by 240%.

Read: September petrol price hikes: How much more it will cost you to fill up from today