SA consumers in tight corner as high prices, fuel hikes take their toll

With more than 40% of South African consumers being technically over-indebted, the reality is that most of them are no longer able to make any further adjustments to their budgets, Neil Roets, CEO of Debt Rescue, told Fin24 on Monday.

He said average SA consumers were already struggling to make ends meet, and prioritising fuel in line with the rest of their budget is placing them under increased pressure.

Both grades of petrol, 93 and 95 (ULP & LRP), increased by 99 cents and 100 cents a litre (c/l) respectively just under a week ago. This brings the overall retail price of 95 ULP for motorists in Gauteng to R17.08 c/l and R16.49 c/l at the Coast.

"Fuel is a priority item along with items such as rent and food. Consumers are continuously urged to review and revise their budget to make cuts where necessary, so the reality is that most of them are no longer in a position to make any further adjustments," said Roets.

Fuel hikes likely to continue

He said it appeared that fuel prices would continue to increase over the foreseeable short-term future.

"Consumers are strongly urged not to incur unnecessary debt - especially on luxury items - live within their budgets and seek professional help if they cannot make ends meet," he said.

Dave Mohr, chief investment strategist and Izak Odendaal, investment strategist), at Old Mutual Multi-Managers, commented that there was not much to be done about the local petrol price.

About half of the R17 per litre petrol price is a simple function of global petroleum prices and the rand-dollar exchange rate. About 15% is margins earned by various players in the value chain, and the remainder consists of various levies. The Road Accident Fund levy is R1.93 per litre and the fuel levy R3.37.

They said the government could, in theory, cut those levies, but would then need to raise taxes elsewhere. The fuel levy is expected to raise R70bn in the current fiscal year.

Oil price a 'dim prospect'

Mohr and Odendaal said the impact of the fuel price on the SA economy would depend on a number of factors, such as the extent to which motorists can avoid unnecessary trips and companies absorb costs rather than pass them on to consumers.

"The bottom line is that it is not good news for the local economy, and talk of $100 oil, premature as it may be, is a dim prospect," they cautioned.

"Higher fuel costs eat into households' income and businesses' margins while increasing the trade deficit and potentially increasing inflation."

While last week’s Jobs Summit and the recently announced stimulus-package are steps in the right direction, they are very unlikely to impact economic growth rates in the short-term, in their view.

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