Consumers have been warned to brace themselves for a tough financial year.
With the VAT increase for the first time in 25 years having started three days ago, consumers also have to contend with today’s massive petrol price increase.
Last month, the petrol price dropped by 36c per litre and, from today, the price will increase by 72 cents a litre for 95 octane while 93 octane goes up by 69 cents a litre. The price of all grades of diesel will climb by 65.2 cents a litre.
Dr Iraj Abedian, chief economist at the Pan-African Investment & Research Services warned that the cost of living would increase, making it difficult for low income households to survive.
“It is particularly going to be hard on the lower income households. They spend a lot more on transport relatively speaking. A higher percentage of their disposable income goes to transport costs which will be affected by the petrol price as well and obviously VAT.”
He said because lower income households were more indebted, it would be harder for them to pay off their debts. Abedian recommended the heavily indebted work on getting rid of their debt as soon as they can.
“It’s going to be a tough year. My advice is to consolidate your debt. The general advice is try to reduce the cost of your debt. Very often such households have debt from different sources and if they consolidate their debt they will save a fair amount.”
He said consumers should also not take on any new debt as it would be harder to pay off.
“Don’t think of taking on any new debt until you have taken down your current debt. Be careful because it may not be the end of the petrol increase. Global economic conditions are fairly robust and the chances of petrol in dollar terms may go up which may continue increasing the cost of transportation,” Abedian said.
United Association of SA (Uasa) spokesperson Andre Venter also echoed Abedian’s sentiments that consumers should tighten their belts.
“The resulting extra expense will put workers under pressure as all basic necessities such as food, clothing and transport will be affected. Companies will pass on the increases to the consumer through price and fee hikes, or may have to retrench workers to stay profitable.
“It seems the state is spending far too much money and the country’s workers are expected to fund the excesses. This while Stats SA’s 2017 Poverty Trends report shows that around 55% of South Africans live below the upper poverty line. Clearly, our upcoming middle class and the poorest of the poor will once again suffer most.”
Uasa demands that the state start saving on its expenditure wherever possible and without delay and start acting in the best interest of its citizens.
Financially crippling the workers is not the way to go about creating a better future for all, it added.