University of Johannesburg economist Peter Baur said households would be more affected. “This is because their disposable household income is not increasing and yet everything is. Interest rate is up, inflation is up and so what happens is that households need to then shuffle around their budgets, look where cuts can be made because one does need electricity.
"You start thinking about critical elements like, ‘can I really afford my child a better school or can I actually buy the necessary equipment for the school?’ Sometimes [this pushes to] even cutting back on medical security,” said Baur.
“Global prices increase and Europe is now going into summer, which helps with food production and it slows down food past inflation. Also coming out of winter for them, there’s going to be less demand for energy, so we are going to have less structural pressure over the next few months but an increase now in these energy prices [electricity and petrol] affects households even more,” said Baur.
These increases put a lot of households at risk, he said. “It’s always the poorer households that get affected the more, the lower the income groups, the more they are affected. The cost of living is getting worse and people are borrowing more than they can save,” said Baur.
Economist Nicky Weimar echoed Baur's sentiments, saying consumers will feel the pain of these increases.
"You have electricity tariffs not quite increasing at the same pace as last year but rising at double-digit rates has an effect on the poor households. Although these changes are significant to consumers, it is still better than last year," said Weimar
“The changes are not that dramatic and what we are really experiencing is just the effects of having a weak currency and that is playing out in a bad way, especially on anything we have to input, which is not just fuel and this does add to the cost of living increase without a doubt.
“Electricity has been a source of strain for South Africans for a long time, as it’s been growing at a much higher rate than inflation for almost a decade. This is as a result of the ongoing challenges faced by Eskom with debt needing to be dealt with and thus resulting in the continuous increase to try and balance everything out."
Motorists to fork out more for petrol
... after Eskom hiked electricity price by 12%
Image: Thulani Mbele
Economists say households' budgets will continue to be constrained as the cost of living rises in the country.
Consumers will have to dig deeper following Eskom’s 12% electricity price increase, which came into effect yesterday.
At midnight, motorists will have to fork out more for petrol as prices are set to go up again.
The National Agricultural Marketing Council’s (NAMC) latest food basket monthly price report shows that "during February 2024, the nominal cost of the NAMC’s 28-item urban food basket amounted to R1,257.23 compared to the R1,251.50 reported in January 2024".
"This represents a monthly increase of 0.5% and a year-on-year increase of 9.5%," read the report.
April will bring petrol price hikes but some diesel reductions
University of Johannesburg economist Peter Baur said households would be more affected. “This is because their disposable household income is not increasing and yet everything is. Interest rate is up, inflation is up and so what happens is that households need to then shuffle around their budgets, look where cuts can be made because one does need electricity.
"You start thinking about critical elements like, ‘can I really afford my child a better school or can I actually buy the necessary equipment for the school?’ Sometimes [this pushes to] even cutting back on medical security,” said Baur.
“Global prices increase and Europe is now going into summer, which helps with food production and it slows down food past inflation. Also coming out of winter for them, there’s going to be less demand for energy, so we are going to have less structural pressure over the next few months but an increase now in these energy prices [electricity and petrol] affects households even more,” said Baur.
These increases put a lot of households at risk, he said. “It’s always the poorer households that get affected the more, the lower the income groups, the more they are affected. The cost of living is getting worse and people are borrowing more than they can save,” said Baur.
Economist Nicky Weimar echoed Baur's sentiments, saying consumers will feel the pain of these increases.
"You have electricity tariffs not quite increasing at the same pace as last year but rising at double-digit rates has an effect on the poor households. Although these changes are significant to consumers, it is still better than last year," said Weimar
“The changes are not that dramatic and what we are really experiencing is just the effects of having a weak currency and that is playing out in a bad way, especially on anything we have to input, which is not just fuel and this does add to the cost of living increase without a doubt.
“Electricity has been a source of strain for South Africans for a long time, as it’s been growing at a much higher rate than inflation for almost a decade. This is as a result of the ongoing challenges faced by Eskom with debt needing to be dealt with and thus resulting in the continuous increase to try and balance everything out."
April points to lower than expected fuel price increases
Oupa Motshweni, the leader of the Mamelodi Residents Association, said the increase is quite unfair.
“How do you also expect us to pay more for electricity when there's load shedding? I have residents who are told that they have R120,000 electricity debt and that they need to pay 30% until they are reconnected again,” said Motshweni.
Phuti Mohlabeng, a consumer, said she spends R2,500 on groceries alone and pays R250 for electricity monthly.
“I just entered the employment sector and I wasn’t prepared for these costs. The cost of living is high and with the electricity tariff, I have to look at my budget because now it throws everything that I had calculated way off.
"I mean, I try saving on electricity, I switch off the geyser and everything but still, it’s a lot,” said Mohlabeng.
mashalek@sowetan.co.za
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