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Bumpy ride for consumers in July as food and utilities rise

Consumers should prepare for even tougher times ahead with the prices of basic foods set to increase.

Consumers should prepare for even tougher times ahead with the prices of basic foods set to increase.

Published Jun 10, 2022

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Durban: South Africans are in for a bumpy ride in July with the cost of utilities, petrol and food all set to rise.

This week, councillors at eThekwini Municipality approved a budget of R55 billion – money it will raise from those who live and work in the city:

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◆ Electricity goes up by 7.47%

◆ Water for homes rises by 5.9% while

businesses pay 9% more

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◆ Sewage costs go up by 5.9% for

homes and 9% for business

◆ Refuse removal prices increase 4.5% for residents and 7.9% for business

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Those who live and work in the municipality have also been subjected to higher increases on insurance premiums following the unrest in July last year and the floods during the course of this year.

Meanwhile, next week Parliament will debate the rising cost of fuel.

Prices have been going up in the past few months and are expected to continue rising as the conflict between Russia and Ukraine drags on, China returns to work after a Covid-19 induced shutdown, and the northern hemisphere goes into winter later this year.

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At the beginning of June, petrol prices in South Africa were expected to go up by almost R4 a litre which would have pushed up the price of 95-octane unleaded petrol to just over R25 a litre.

However, the government extended the R1.50 tax relief it provided during April and May providing some respite for motorists.

That relief will drop to 75 cents a litre in July meaning that irrespective of what happens with the international price of oil or how much the rand strengthens, petrol will cost 75 cents more a litre.

By August, the government will not be in a financial position to provide any further relief resulting in another 75 cent a litre hike on the price of petrol. Only a firmer rand or tumbling oil prices will change the equation.

The Durban Chamber of Commerce and Industry says it is “deeply concerned” about the impact of rising petrol prices on jobs and the survival of businesses.

“South Africa is extremely reliant on the logistics sector, from our roads, rail, and ports. We believe the fuel price increase will lead to price inflation of goods and services across the country, making food and commuting very expensive. The whole economic ecosystem will be affected. This a huge threat which can lead to negative pushback and social unrest.

“Currently, there is a lot of uncertainty on the fuel matter. Business owners cannot survive on short-term relief. They need certainty to make informed decisions.

“The Durban Chamber of Commerce and Industry believes collaborative co-operation between the private and public sector is non-negotiable and will yield great results that will contribute to the sustainability of businesses and the economy. It is the responsibility of the government to create a conducive environment for businesses.”

Meanwhile, South Africa’s big food producers are pricing in hikes that will affect consumers in the coming weeks.

Premier FMCG said it anticipated further food inflation in the coming months. Its brands include Snowflake, Blue Ribbon, BB Bakeries, Star, Mister Bread, Iwisa and Nyala.

Kobus Gertenbach, the chief executive of Premier, said: “Food safety and security remains a priority for Premier. We will continue to minimise the impact of cost increases on the end consumer, but unfortunately, some factors are beyond our control.”

Tiger Brands, home to companies like Albany Bakeries, Jungle, Koo, Golden Cloud, Tastic and ACE, said in a statement: “The company is intensifying its efforts to reduce costs and drive efficiencies to minimise the need for selling price increases.

“Nevertheless, significant price increases across most of the portfolio are inevitable with inflation for some food categories expected to run into double digits during the second half of the company’s financial year.”

Mervyn Abrahams, a programme co-ordinator at the Pietermaritzburg Economic Justice and Dignity Group, said the cost of the average food basket had shot up between R50 and R100 month on month, and by more than R400 compared with a year ago.

He said those most at risk were people already living below the poverty line. “What is also concerning is that wages are just too low.”

THE prices of bread, flour, maize meal and oil are expected to further increase over the next few months.

Premier FMCG, which produces and markets brands such as Snowflake, Blue Ribbon and BB Bakeries, said Russia’s invasion of Ukraine had impacted the availability of wheat.

It said, in addition, the increase in the input costs of oil, fuel, fertiliser and freight would also drive up costs.

“It is anticipated that the Ukraine crop will reduce versus the prior year and that continued port disruptions will have a knock-on impact on wheat and availability of other commodities, throughout the world.

“In the past year, critical inputs such as fertiliser, fuel, freight, and imported inputs had also experienced cost increases following the Covid-19 pandemic,” it said.

Premier said in the last quarter, they had passed on cost pushes across the product portfolio, including staple foods, and anticipate the need for further increases in the next quarter.

Cost pushes are an increase or upward trend in production costs, such as wages and raw material, which tend to result in increased consumer prices irrespective of the level of demand.

Siobhan O’Sullivan, the group strategy and marketing executive of Premier, told POST that some consumers are downtrading, consuming less, or changing the brands of the staple foods that they generally used. She said consumers also switched between retailers and were price-conscious.

“However, Premier operates in a lean cost environment and is continuously looking for ways to reduce costs and improve efficiencies, including alternative sources of supply where possible without compromising quality and food security.”

Kobus Gertenbach, the chief executive of Premier, said they would continue to minimise the impact of cost increases on the end consumer, but some factors were beyond their control.

In a statement, Tiger Brands, a food and beverage company, said, like other manufacturers, they also felt the impact of the global supply chain squeeze and related inflationary pressures.

Some of their food brands include Albany Bakeries, Jungle, Koo, Golden Cloud, Tastic and ACE.

“The company is intensifying its efforts to reduce costs and drive efficiencies to minimise the need for selling price increases.

“Nevertheless, significant price increases across most of the portfolio are inevitable, with inflation for some food categories expected to run into double digits during the second half of the company’s financial year.”

Mervyn Abrahams, a programme co-ordinator at the Pietermaritzburg Economic Justice and Dignity Group, said those who would be impacted most already lived below the poverty line.

“What is also concerning is that wages are just too low. Wages are not keeping up with the level of increase.

“Food inflation for low-income households is currently running at over 10% and is eating away at the buying power of households.

“Further to this, transport and electricity have become so expensive as well as debt services because of the increased repo rate. Households have less money available to purchase food, while at the same time the price of food is going up.”

Abrahams said that based on their research, the average household food basket cost between R50 and R100 more per month and more than R400 compared to the same time last year.

For May, the cost of the average household food basket was R4 609.89. It had increased by R66.96 (1.5%) from R4 542.93 in April. It had increased by R472.78 compared to the same period last year.

According to their research, these were some of increases of items in the food basket from April to May this year:

◆ A 30kg maize meal increased by R7.44 from R252.11 to R259.55

◆ 10kg cake flour increased by R3.65 from R104.73 to R108.38

◆ 25 loaves of white bread increased by R5.75 from R357.92 to R363.67

◆ 25 loaves of brown bread increased by R1.44 from R329.41 to R330.85

Other items that increased included 5 litres of cooking oil, frozen chicken portions, potatoes, onions, tomatoes and spinach. “We expect the prices of food to be much higher this month. This will result in people’s food baskets getting even smaller and the quality of food being compromised as people look for what is cheaper.

“Cheaper food generally means less nutritious food, and that has repercussions on one’s health, education and the overall economic productivity in the end.”

Advocate Ben van der Walt, the general secretary of the South African Parastatal and Tertiary Institutions Union (Saptu), said they wanted organisations, individuals and the government to suggest ways to ease the pressure on local budgets.

“If the cost of living continues to rise, it will be difficult for most South Africans to sustain their livelihoods.

“Even though the government extended its general fuel price levy intervention until the beginning of August, drivers will have to fork out more than R24 per litre, with another significant increase coming in July.

“That makes our fuel some of the most expensive on the African continent. It is also getting increasingly difficult for our members to get to work and make an adequate living.”

Van der Walt said while Statistics South Africa recorded food inflation at 6.2% in the latest Consumer Price Index, other independent groups put the yearly food price inflation at 11.4%.

“We have members in the agricultural sector who work closely with its representative organisations. Commercial farmers accept prevailing prices in the market, instead of making them. They have had to pay exceptionally high minimum wages these past few years. More farmers are either moving towards mechanisation, bowing out of agriculture or taking their expertise out of the country. This adds to unemployment in rural areas, and more expensive products as it becomes less available.

“Add the electricity and water issues, and the South African picture does not look rosy in the next few years.

“Saptu is realistic about the future but does not want to only point out the negatives. With this in mind, it is actively looking for solutions for members and all South Africans,” he said

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