By Lyse Comins and Kailene Pillay
Durban - A third of South Africa’s middle-class is likely to be “wiped out” due to the Covid-19 lockdown as consumers continue to battle spiralling food and fuel prices in the aftermath of job losses and salary cuts, a UN study has predicted.
This comes as Statistics SA data released yesterday revealed annual consumer price index inflation rose to 3.2% in July from 2.2% in June as lockdown restrictions continued to ease.
“The monthly increase between June and July was 1.3%, the biggest monthly rise since February 2016 when the rate was 1.4%.
“The monthly move in July was driven largely by fuel prices and municipal tariffs. Motorists felt some pain as the price of inland 95-octane petrol climbed from R13.40 a litre in June to R15.12 a litre in July. The average price for a litre of diesel jumped from R13.13 to R14.62,” Stats SA said in a statement.
However, despite these increases, fuel was 6.2% cheaper this July than it was in the same month last year.
“Municipalities normally introduce revised tariffs (for water and electricity) and municipal rates in the month of July. The increases in July 2020 are lower than the increases recorded in July 2019,” Stats SA said.
According to Stats SA, electricity tariffs increased by 6.3%, water tariffs by 9.9% and municipal rates by 3.5%.
Annual food and non-alcoholic beverages inflation had remained in the 4.2% to 4.4% range since February 2020.
“On a monthly basis, brown bread prices increased by 2.3% between June 2020 and July 2020. White bread was 2.0% more expensive over the same period. Meat prices were unchanged on average between June and July.
“But chicken prices saw aggregate declines with IQF (individually quick-frozen) bags decreasing by 1.9% between June and July, and fresh portions by 0.4%,” Stats SA said.
“Funeral expenses increased sharply in July, rising by 8.7% year-on-year.”
The UN Development Programme study on the socio-economic impact of Covid-19 has forecast that as many as 34% of households are likely to exit the middle class into “vulnerability”, with about a 44% chance of individuals with permanent employment changing to contract jobs and likely falling into poverty. The study on how Covid-19 would drive temporary and long-term changes in poverty concluded that pandemic had wiped out a third of the country’s middle class.
UN resident co-ordinator Nardos Bekele-Thomas said inequalities within nations had been exacerbated by Covid-19, as the poor and vulnerable were unable to protect themselves. The study forecast that overall GDP would decline by 7.9% in 2020 and that it would recover slowly through 2024.
Consumer activists, debt counsellors and economists said consumers were battling, and retailers would feel the pinch and be unable to hike prices as purse strings tightened.
PwC economist Christie Viljoen said the “large recession” would see the economy shrinking by 10.4% in 2020 and this would dampen further price increases.
“South African retailers will need to contend with, by our estimates, a net loss of 1.6 million jobs in the country by the end of this year. The adverse impact that this will have on disposable income and household expenditure will further increase retailers’ inability to significantly pass on price increases to strained consumers,” Viljoen said.
“PwC sees room for a little more monetary policy easing from the SA Reserve Bank - there’s currently not much room left to further open the taps,” he said.
He said the 6.2% hike in electricity and fuel prices in July was more moderate than the 10.3% hike in July 2019.
“However, while this is positive news for the current pricing environment, Eskom recently won a court battle to raise its tariffs by a larger margin over the next three years. Electricity and other administered prices have this year been the main key upside risks to the inflation outlook,” Viljoen said.
Pietermaritzburg Economic Justice and Dignity (PMBEJD)’s latest food index report released yesterday revealed the price of a basic food basket rose to almost R3500 in August.
Although the survey focuses on low-income households in Pietermaritzburg, it provides insight into how much money most South Africans need to feed a family in a month.
According to the index, the price of basic food staples slowed over the past two months but there was an unexpectedly sharp increase in prices in August. Between July and August the basket increased by 1.7% or R57.85.
PMBEJD Programme Co-ordinator Mervyn Abrahams said: “The upward trend in August suggests that prices are again on the rise. This is very worrying as increases are happening off a high base. We had not expected an upward movement so soon, nor had we expected the increase to be as sharp.”
Independent consumer activist Thami Bolani said consumers were struggling to cope with rising food and electricity prices. “A lot of consumers have been at home during the lockdown period and have been doing quite a lot of buying, and demand has shot up, and that has resulted in prices going up because of shortages in a number of shops, mainly of vegetables and fruit,” Bolani said.