How rise in prices hits your pocket

Brian Hayward  haywardb@avusa.co.za

THE third consecutive year of double-digit increases in Nelson Mandela Bay municipal rates and electricity tariffs, which kick in from today, coupled with steep food and fuel price hikes, is driving residents and businesses to the brink of bankruptcy.

A price survey by The Herald has found that while annual household incomes have risen between 4% and 8% in the past year, the costs of fuel, food and municipal tariffs have risen 16%.

Economists warn this is just the tip of the iceberg as interest rates – the lowest since May 1974 – are due to start climbing from the end of the year, while food inflation is already at its highest in two years, at 6.3% and climbing.

The expected rise in the prime interest rate, which is at 9%, will also negate any recent savings on bond instalments against the higher costs of essentials such as transport, electricity and food.

A basic basket of goods – comprising items such as cereals, bread, margarine and dairy products – has increased from R530 in July 2009 to R619 today, petrol (95 unleaded along the coast) from R7.27/l to R9.93/l, and electricity in the metro from 70c per kilowatt hour (one unit) to R1.05/kWh today.

Debt counsellors say the several years of double-digit increases, while household salaries have only increased in the single digits, will be “the straw to break the camel’s back”.

“People who own properties are seeing double-digit increases over several years, while they are still on single-digit salary increases. This has a compounded effect over the years, which hits people’s budgets and debt reviews [people who are deep in debt] are likely to increase,” said Luke Hirst, managing director of debt counselling service Debt Busters.

And there seems to be no relief in sight from the steep electricity tariff increases, as not only will Eskom raise tariffs by 25.9% next year, but its chief executive, Brian Dames, has insisted that a proposed carbon tax which could treble the parastatal’s coal costs will be passed on to consumers.

“We are not in a position as a company to absorb these costs,” Dames said on Wednesday. “It will be a full pass through to consumers.”

The tax, which is being considered by the government, follows plans to reduce greenhouse gas emissions by 34% by 2020, and 42% by 2025. South Africa is the world’s 13th-biggest emitter of carbon dioxide, emitting 451 million tons a year. Analysts predict the tax could translate into about 18c/kWh, on top of the existing tariff.

Meanwhile, despite the absence of statistics for the metro, business analysts say jobs are being shed as residents feeling the pinch cut back where they can, including dining out and on the use of casual labour such as domestic workers.

“Many consumers are really struggling. Not only do we have high rates increases, but we have had a recession and are also dealing with very high unemployment levels,” said National Consumer Forum chairman Thami Bolani, who also chairs the Estate Agency Affairs Board.

“Families spend a substantial amount of their incomes on food, which means they have to now cut down on necessities. The reality is that life for ordinary South Africans is getting worse and we don’t know when it is going to end.”

According to The Herald’s price survey, an average Bay household of six will pay almost R1500 more a month, from today, on costs including food, fuel, property rates, electricity, water, refuse and sewerage. A two-person household will have to fork out about R600 more monthly.

Rafick Mahomed, a 59-year-old Korsten businessman, said times had never been so tough in his 30-year working career. His household, in which Mahomed is the sole breadwinner, includes two daughters – one NMMU student and another who has just started working – his wife, a two-year-old grandson and a full-time domestic worker.

 “In the early ’80s, when inflation and interest rates were high [over 20%], there was still the business to offset that, but now even business is bad. We are all struggling. We can’t live like we used to in the ’80s and the ’90s,” he said.

Sherwood resident Leigh Kramer, 31, has just moved into a new house with his five-month-pregnant wife.

His bond repayments are about to kick in.

With a newborn on the way, the Kramers have had to work out a 12-month budget, switch to a cheaper insurance company and cut back on their electricity and cellphone use.

“With all the budgeting, things tend to get a bit tense at home, so we go out less, but when we do [go out] we make it count.

“I’m even cutting down on my smoking. I feel for the guys who have many kids. I’m just having one child, and it’s quite a cost,” Kramer said.

Nedbank economist Isaac Matshego said disposable household incomes were likely to contract even further should inflation continue rising. “We have also experienced very steep petrol increases over the past year or so,” Matshego said.

“The cost of living has absolutely increased.

“Non-discretionary spending [on food, transport and energy goods like petrol and electricity], and also housing, is taking a bigger chunk of consumers’ incomes.”

Nelson Mandela Bay Business Chamber chief executive Kevin Hustler said the organisation was concerned about the increases and their effect on businesses.

“The increase [in tariffs] will also be passed on to consumers, who have to manage tight household budgets in the face of increased domestic electricity tariffs and other rising costs such as fuel and food.

“This inflated [electricity] price increase [22%] poses a severe challenge to industry, which is struggling to cope with increased input costs,” Hustler said. Additional reporting by I-Net Bridge

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