South Africans are burning through credit to make ends meet. Photograph: David Ritchie/ Independent Newspapers.
Consumers have been given a slight reprieve this month after the Department of Mineral Resources and Energy (DMRE) announced a cut in the petrol price this past week.
On Wednesday last week, the price of both grades of petrol dropped by R1.24 per litre while the cost of diesel fell by between R1.08 (50ppm) and R1.18 (500ppm).
This means that in June, a litre of 95 unleaded costs R23.46 at the coast and R24.25 in the inland regions while 93 unleaded petrol will retail for R23.91.
Lebo Ramolahloane, the vice chairman of the South African Petroleum Retailers Association (Sapra), representing the interest of numerous petroleum retailers in South Africa and a proud association of the Retail Motor Industry Organisation, told Business Report that motorists could look forward to a significant fuel decrease thanks to a strengthening rand against the US dollar and lower prices for Brent Crude oil.
Ramolahloane said, “The reduction will also positively impact commuter costs and provide families with enhanced spending power.
“With more disposable income, families are likely to spend more on local services and retailers. From dining at local restaurants to shopping at convenience stores, this increased spending supports the community and stimulates the local economy.”
However, according to Neil Roets, the CEO of Debt Rescue, he said that South Africans can be forgiven for not jumping for joy at the news of a humble petrol price cut.
“The reality is that it is cold comfort for motorists and commuters who have been hit very hard with four consecutive hikes in petrol earlier this year, along with soaring electricity prices and food prices that have escalated out of proportion to salaries,” Roets said.
Roets further said, “Sadly, this is the ‘new normal’ for South African consumers, definitely for the foreseeable future. There is no doubt that one of the main drivers is the astronomical interest rate people are paying on home and car loans and other big debt, with monthly home loan repayments currently at least 40% higher than three years ago. This necessitates a diversion of spend from necessities like food and healthcare. Will the normalisation of hunger be next in line?”
The Automobile Association said, “While the decreases will bring relief, the cost of fuel is still higher now than it was a few months ago. Consumers are embattled, and it is incumbent upon the government to find ways to deal with this situation. AA reiterated its call for a review of the fuel pricing mechanism to ‘determine if there are any factors that can be permanently revised to mitigate against rising fuel costs in future.”
Roets further added that South Africans were burning through credit to make ends meet.
He said, “There has been a sharp decline in the spending power of South Africans across the board with people buying less food than before, while one in four families go hungry in the country. The combination of factors driving this, aside from the decline in consumer buying power, are elevated inflation and reprioritisation of spending amid elevated interest rates, as citizens struggle to survive while contending with the highest interest rate the country has seen in over a decade, fuelled by soaring inflation.”
BUSINESS REPORT