South Africans stretched thin as fuel, food and electricity costs soar

Filling a car with fuel has not been a pleasant experience for years, nor has the arrival of the monthly water and electricity bill. People have become noticeably glum and quiet when shopping for groceries.

Prices of these three necessities have increased dramatically over the last few years, adding thousands of rand to the expenditure of an average household.

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Food is expensive. Any consumer, rich or poor, will have noticed that the price of their favourite food or brand has increased sharply during the last few years.

Whether fuelled by the war between Russia and Ukraine, logistical problems at home, load shedding, climate change or expensive diesel for tractors, combine harvesters and trucks, does not matter much to the consumer – buying only the basic foodstuffs costs much more than it did a few years ago.

The latest inflation figures from Statistics SA show that the average basket of food cost a consumer 6.1% more in February than it did a year ago.

It might not sound much, but the annual increases since 2019 add up to nearly 41%.

A trolley of food that cost R1 000 in February 2019 now costs R1 460. Alternatively, R1 000 worth groceries would barely cover the bottom of the trolley this week.

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Importantly, most shoppers would dispute that the cost of groceries has only increased from R1 000 to R1 460 during the last five years, even if the statisticians at Stats SA present them with the prices of every food item used to calculate the inflation rate. (Stats SA publishes the full list of the monthly price survey on its website.)

There is no uncertainty about the changes in package size or different prices across competing brands.

Fuel

There is no uncertainty about the fuel price either.

The latest increase in the petrol price of 65 cents per litre in inland areas was not that bad, while the price of diesel increased only a few cents for inland motorists and declined a few cents for those living at the coast.

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However, fuel prices have increased nearly every year for the last five years. In April 2019, a litre of unleaded petrol at a filling station in Cape Town cost R15.49. It now costs R24.33. It has become nearly R9 more expensive per litre.

And one litre won’t get you very far. The cost of filling up an average fuel tank of 65 litres has increased from R1 006 to R1 582.

Interest rates

The sharp increase in interest rates gave consumers’ wallets another hard blow as the interest rate cycle turned in 2020. Interest rates were still declining during the first half of 2020, with the prime lending rate reaching a low of 7% in July 2020.

Then came the first hike of 25 basis points to 7.25%, followed by two more to push the prime rate to 7.75%, according to South African Reserve Bank data. Currently, the prime lending rate is still at a decades-long high of 11.25%.

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The increase from a low of 7% to the current 11.25% has seen the repayment of a mortgage bond of R1.5 million rise by R5 300 per month.

The instalment on a car loan of R300 000 has increased by just over R1 000 per month.

The bad news is that interest rates are probably going to stay high for longer than previously expected because of the negative effect of the very weak exchange rate on inflation.

Electricity

The price of electricity – another necessity – has increased even faster than that of food, fuel and borrowing money.

A guest house owner in George dug out old municipal accounts showing that the electricity tariff has increased by 41% since 2019, from R1.94 per kilowatt hour (kWh) to R2.74, excluding Vat.

PowerOptimal, a supplier of sustainable energy solutions in Gauteng and the Western Cape, calculates that electricity prices have increased fourfold in real money terms over the space of 14 years.

Sean Moolman is co-founder of PowerOptimal and its chief operating officer.

He says electricity tariffs increased by 653% between 2007 and 2022, compared to the inflation rate of 129%.

“Considering the current serious state of Eskom’s debt and the fact that the country probably cannot afford for Eskom to fail, consumers can likely expect a continuance of much higher than inflation electricity price increases over the next several years,” says Moolman.

“The problem [for Eskom] is that customers that can afford to pay these high prices can afford to dump Eskom in favour of solar systems.

“Profitable clients are leaving. Eskom’s base of paying customers is shrinking, making even bigger tariff increases necessary, and making the alternatives more attractive,” he adds. “It’s Eskom’s death spiral.”

Moolman says the problems run much deeper than electricity generation in that the national transmission grid has not been maintained properly, nor did municipalities maintain and expand their distribution networks as needed.

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Households differ vastly by size and the electrical appliances they use, making a guess of how much electricity an average household uses difficult. The cost of 500kWh of electricity increased from R770 in 2019 to R1 230 this year, according to Eskom’s published rates for homeowners buying directly from Eskom.

However, municipalities are adding their cut on top of the tariffs, as well as ever-increasing basic charges.

Adding it all up is tough – technically and emotionally

Fuel consumption differs from person to person, as does grocery shopping and the amount of debt one has.

However, one tank of fuel, a cart of groceries, 500kWh of electricity and servicing debt will cost nearly R7 000 more than a few years ago.

This article was republished from Moneyweb. Read the original here