Petrol price hike to add to consumer woes

2014-02-20 14:41

The projected increase in the petrol price of about 30c a litre will peg the fuel price at an all-time high of about R14.20 a litre.

This will add to the woes of deeply indebted consumers, Debt Rescue CEO Neil Roets warned today.

The steep increase in petrol and food prices were the main reasons for the surprise spurt in the January Consumer Price Index (CPI) of 5.8% from 5.4% in December. Economists expected a rise in the CPI to 5.7%.

Merina Willemse, an economist with the Efficient Group, told Fin24 this meant more interest rate hikes later this year.

“For now we are forecasting another 100 basis points increase in interest rates for 2014,” she said.

Roets said the projected major increase in the petrol price next month could lead to more South Africans falling into the debt trap.

The petrol price increased by 38c and 39c a litre respectively last month and this month.

Roets said substantial numbers of consumers could be facing impaired credit records by being blacklisted.

“We have seen a substantial increase in the number of clients knocking on our doors, seeking relief by being placed under debt review.

“To some degree, this is the result of the general increase in the cost of living, but the monthly increase in the fuel price is beginning to play a major role.”

Economist Dawie Roodt of the Efficient Group said if the rand did not deteriorate further, the petrol price for all grades would increase by between 30c and 33c a litre, while diesel would increase by between 25c and 26c a litre, taking both to historical highs.

Gina Schoeman, an economist with Citi Research, a division of Citigroup Global Markets, expects more upside for inflation this year.

“This would be due to upside pressure building in petrol – 39c a litre in February and a likely 26c a litre in March – and food and rand pass-through,” she said.

“By the first quarter of 2015, we believe that the 150bps in rate hikes we are factoring in – 50bps in January, March and July respectively – will be enough to push CPI back into the target range.”

According to the National Credit Regulator, Roets said there were 9.76 million consumers with impaired records in SA. This means their accounts have not been paid for three months or more.

According to StatsSA, total consumer debt is now topping R1.44 trillion.

Roets said rising food and fuel costs and slow economic growth were making it difficult for many South Africans to pay back their loans on time.

One in every four South Africans is unemployed and the number of borrowers with impaired credit records has risen to nearly 50%.

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