South Africa 15.3.2018 06:46 am

Now is the time to get tight with your cash

Milicent Maswanganye and her son Xivuriso queue on Black Friday at the Checkers store in the Mall of Africa in Midrand on 24 November 2017. Picture: Yeshiel Panchia

Milicent Maswanganye and her son Xivuriso queue on Black Friday at the Checkers store in the Mall of Africa in Midrand on 24 November 2017. Picture: Yeshiel Panchia

While VAT, electricity and sin taxes are going up, the 52c fuel levy hike could be offset to some extent by a decrease in the fuel price.

In 18 days the world as we know it will not end – despite what people are thinking about the pending increases in petrol, value added tax (VAT), electricity, and of course those pesky sin taxes.

It doesn’t mean people should be spendthrifts, economists have cautioned.

The aeons-old date of 1 April set aside for tomfoolery is the date set down by National Treasury for a rise in VAT from 14% to 15%, along with the 52 cents per litre in fuel levies.

Municipalities too, are upping their rates and taxes. However, there is – if not good news – some relief.

“It looks like some of the 52c will be taken up by a decrease in the fuel price; we should see about a 40c increase,” said economist Mike Schussler.

“People will also try to circumvent the VAT increase, which we will see in very strong March sales. People will buy things that don’t go off – for example, toothpaste, toilet paper, cooking oil and the like; then the April numbers will look a lot worse.”

The pending sugar tax was not to be forgotten, which could add up to R1.39 per litre for fans of sweet fizzy drinks, as well as fruit juices, iced teas, or anything else that has fructose or sugar in it.

“Electricity this time around was not too bad, it was the second lowest increase in a decade at 5.2%,” Schussler noted.

He expected the inflation rate to keep its lows of around 4% for March, and to start climbing again in April and May.

“People have to keep looking for the bargain,” Schussler said.

In business, be prepared to work harder to stay afloat.

In January, Stats SA found liquidations increased by 11% (10 more liquidations) year-on-year in January 2018.

Compulsory liquidations increased by five cases and voluntary liquidations increased by five cases during this period.

“Financing, insurance, real estate and business services increased by 20 liquidations (from 30 to 50) and trade, catering and accommodation decreased by 12 liquidations,” Stats SA reported, and noted insolvencies showed a year-on-year decrease of 42%.

Economist Dr Azar Jammine noted consumers who bought electricity from their municipalities would only start feeling it at the end of July.

“We don’t know exactly what the increase will be yet but Nersa has recommended 6.48% and it will be lower than last year’s tariff.”

“Don’t forget petrol has come down a long way in the past few months and it will still be lower than the price paid in January even after the increase. By the way, it may not rise by the full 52c as announced in the budget,” Jammine said.

He explained under normal circumstances at current oil prices at the current exchange rate the price could actually come down by the end of April.

“VAT will definitely affect disposable income and result in about a 0.5% reduction in what people will have available to spend.”

Jammine said although the effect of the VAT increase would be “heavy”, the cost of living had come down significantly over the past year.

“It would help if government spent less money; then we wouldn’t have to have increases in VAT or personal income tax.”

 

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