Price increase storm looms

2012-02-27 00:00

CONSUMERS should hold on tight to their wallets as a price increase storm looms, economists warned yesterday.

While a hike in food prices over Easter is the norm, this year’s price surge comes with further fuel and electricity increases.

It’ll be more expensive to fill cars next month, and more again in April.

On top of that will be electricity tariff hikes — Eskom’s 25,9% in April and that of municipalities three months later.

However, there could be some relief in mid-winter.

Economists expect consumers to experience some price relief after July, as the rand is expected to strengthen further against the United States dollar.

But consumers will need to keeep their heads above the rough water between March and July.

Buying meat, fruit and vegetables should require them to dig deep into their pockets over the next six months. The good news is that the prices of maize and wheat products are expected to stay the same.

Chris Hart, the chief economist of Investment Solutions, told The Witness that the petrol price was expected to increase by between 20 and 25 cents a litre next month as a result of higher crude oil prices.

He said the rand’s recent strength against the dollar would shield consumers from an even heftier hike. The next fuel price changes will kick in on Wednesday.

Motorists can expect another increase because fuel levy hikes totalling 28 cents a litre, announced in the budget last week, will come into effect in April.

Statistics South Africa said last week that prices of food and non-alcoholic beverages rose by 10,3% last month compared with January 2011.

The National Agricultural Marketing Council’s (NAMC) latest Food Price Monitor found that the increases over the past year were driven mainly by higher prices of oils and fats and meat products.

Dr Andre Jooste, senior manager of the NAMC’s Markets and Economic Research Centre, said food prices would at best stay the same in the short term.

“The transmission of lower raw commodity prices to food prices will not be reflected in all items during this outlook period of three months as the peak prices that were achieved in recent weeks still have to feed through the supply chain,” Jooste said.

Jan van Zyl, agricultural economist at FNB, said the price of maize would be stable over the next few months.

However, he added, the prices of meat products, fruit and vegetables would spike in Easter on the back of higher consumer demand.

While the global food supply outlook is relatively positive, with food stocks relatively abundant, Jooste ruled out a repeat of the market collapse of 2009, when market prices fell by almost 50% in some cases.

In a blow to consumers, Finance Minister Pravin Gordhan announced in his recent budget speech that the levy on electricity generated from non-renewable sources would increase by one cent per kilowatt-hour (kWh).

• kavith@witness.co.za

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