BUSINESS NEWS - Faced with the Covid-19 crisis, prospects of an electricity increase by power utility Eskom’s court bid to raise prices and now an increase in the petrol price – the South African consumer is up against a wall, according to an expert.
Neil Roets, chief executive of Debt Rescue – one of the largest debt counselling companies in South Africa – yesterday said people faced “a double-whammy financial crunch”.
Should Eskom succeed in its legal bid to recover the R69 billion cash it received from government and increase electricity prices as a solution to its liquidity challenge, the impact is bound to be passed on to consumers in the form of transport, food and other price hikes.
“With payment holidays to banks coming to an end, consumers are faced with a grave impact of financial institutions knocking on their doors for money.
“Mortgage, vehicle instalments and insurance policies are running behind, affecting the relief earlier granted by banks to consumers,” said Roets.
Should Eskom succeed in the courts, transport, food and other essentials were likely to go up – “leaving consumers dry”, warned Roets.
He said today’s major fuel price hike was going to further hurt the economy and have a major impact on deeply indebted consumers.
All grades of petrol will from today increase by R1.18 a litre, while diesel goes up by 22 cents a litre.
Increases, said Roets, would have “a devastating impact on consumers who are mostly three months or more behind in the repayments of their loans”.
“This is going to lead to further unemployment and to more consumers piling up more debt.
“While we fully understand that this is outside the control of government, it is nonetheless going to slow down any hopes of a revival of South Africa’s economy battered by the Covid-19 shutdown,” said Roets.
But one of the country’s leading economists, Mike Schussler, said it was not all that bad for motorists.
“The oil price is still lower than it was last year – a very unusual situation for oil to go down that low – but good for the consumer.
“As the world economy started to grow, oil prices started rising again.
“The world economic recovery is influencing oil prices – not that the recovery is 100% done yet – but it is still going to take quite a while to come back.
“I expect that the electricity price increases from July onwards are going to be more painful for consumers than before, with the inflation going up in April quicker than what the SA Reserve Bank would have thought.
“We are not going to see an upward pressure on oil for the next two months.
“We are still going to see a steep price of over a rand – making a difference of R1.40 difficult for SA motorists.
“But many people are still working from home – an easy drive to work and not using as much fuel.
“We are probably going to see a bit of a plateau with oil prices,” said Schussler.