Tag: price hikes

Source: Supermarket & Retailer

South Africans have noticed the price of many goods increasing over the last month, and can expect to see fewer products associated with sunflower oil on retailer shelves as the ongoing crisis in Ukraine bites, says professional services firm PwC.

These constraints have hit in response to higher internal commodity prices and supply scarcity as exports from Ukraine dropped, it said.

“An estimated 27 million tonnes of grain (e.g. sunflowers and soya) is stuck in the country, with up to four million tonnes sitting in terminals and on ships stranded in ports.

“With the ports of Mariupol, Berdiansk, and Kherson under Russian control, harbour infrastructure at Mykolaiv severely damaged, and three ports in the greater Odessa area either blocked or with mined waterways, exports have declined significantly,” it said.

Statistics South Africa reported that the cost of fats and oils increased by 9.5% month-on-month in March due to this supply constraint. Globally, sunflower prices are now 45% higher compared to a year ago.

“South Africa’s imported food products cost 5.0% m-o-m more due in part to the increase in food oil prices: sunflower oil is used in the manufacturing of diverse products, including margarine, ice cream, chocolate, canned goods and breakfast cereals, amongst many others. The food oil product is also used in the production of medicine and other health products.”

Many grain products produced locally, like sunflowers, follow international price trends, PwC said.

“As a result, even the prices of locally produced soft commodities have increased significantly since February. Unsurprisingly, some retailers are limiting the number of products in the cooking oil category that shoppers can buy.

“According to a survey by the Pietermaritzburg Economic Justice & Dignity (PMBEJD) group, the cost of buying a five-litre bottle of cooking oil in Johannesburg increased by 20% from February to April, and jumped by 30% in Durban over the same period.”

Energy prices

The other major import price shock has been the jump in energy prices. Crude petroleum cost 9% monthly and 65.1% annually more to import in March due to higher international commodity prices.

“Motorists would have felt this at the pumps. Despite some welcome tax relief implemented by the government, the Gauteng price for 95 octane unleaded petrol increased from R19.61/litre in January to R21.84/litre at the start of May,” PwC said.

“South Africans were set to see a further R4/litre increase in the petrol price at the start of June due to as weaker rand, higher oil prices, and the end of the two-month tax relief of R1.50/litre.

“Officials from the National Treasury and the Department of Minerals and Energy met on May 29 to discuss various options for extending the relief, though at the time of writing, no decision had yet been announced.”

 

Petrol price hike set to hit South Africa

Source: Supermarket & Retailer

Following a tumultuous first trading week of 2022, global equity and bond markets were calmer last week. There was more action in commodities, with the one-month Brent crude oil future ending the week more than 5% higher, the group said in a research note on Monday (17 January).

“A combination of oil demand holding up despite the Omicron-driven surge in Covidinfections (especially in the US) and supply disruptions boosted the oil price,” it said.

“After some reprieve on the domestic fuel price front in January, the renewed rise in the oil price is likely to result in another hefty fuel price increase in February.”

Rate hike

There will also be a significant focus on inflation data this week ahead of the South African Reserve Bank’s interest rate decision on 27 January, the BER said.

“We expect the headline CPI to increase by 5.8% y-o-y (consensus is at 5.7%), up from 5.5% in November. This is courtesy of a projected 0.4% m-o-m rise, driven by the more than 70c/litre rise in both the petrol and diesel price at the start of that month, as well as the quarterly survey of rental costs.

“As a result of the seasonal rise in meat prices, the food category should also add to the overall monthly CPI increase.”

South Africa is likely to see at least three interest rate hikes in 2022 as the South African Reserve Bank (SARB) has indicated that it will begin unwinding its accommodative monetary policy stance, say economists at Momentum Investments.

In a research note on 4 January, the group said that the SARB’s quarterly projection model calculates a steep interest rate hiking cycle – resulting in interest rates of 5.75% by the end of 2023 and 6.75% by the end of 2024.

“In our view, well-behaved inflation, anchored inflation expectations, and a pedestrian growth outlook advocate a more moderate interest rate hiking cycle,” Momentum said.

“We expect the SARB to hike interest rates thrice by a cumulative 75 basis points in 2022 and a further three times by another 75 basis points in 2023.”

Electricity hike

The National Energy Regulator of South Africa (Nersa) is also expected to table its 2022/23 price determination in parliament at the end of February or the beginning of March.

Eskom chief financial officer Calib Cassim has confirmed that the state-owned power utility has applied for an electricity price increase of 20.5% for its 2023 financial year, set to take effect from 1 April 2022.

On 5 March 2021, Nersa approved a hike of 15.06% for Eskom’s direct customers, which was subsequently implemented on 1 April 2021. A hike of 17.80% for municipalities was implemented on 1 July 2021.

Cape Town mayor Geordin Hill-Lewis has warned that similar increases would simply be unaffordable for most South Africans this year.

“Like the majority of South Africans, many Capetonians are struggling to make ends meet. The pandemic and national lockdown led to the closure of hundreds of businesses in our City and the loss of thousands of jobs. Our residents are faltering under the burden of the rising costs of energy, fuel, food, and basic consumer goods.

“The consumer price index (CPI) is currently stated as 5,5%; this would have been a more reasonable tariff increase for Eskom. The price of electricity has risen by 307% over the past 13 years, far exceeding inflation. Despite paying more for power, South Africans have experienced an unreliable electricity supply — 2020 and 2021 were two of the worst load shedding years on record.”

 

SA consumers worry about price hikes, saving

Source: Supermarket & Retailer

South African consumers over the past year have felt great pressure on their finances and are the most concerned consumer market in the world about the escalation of prices in the near future, according to a survey conducted by auditing firm Deloitte.

The survey was released on Wednesday morning by way of virtual webinar. The survey’s data speaks in great part to the impact of the pandemic on the finances of South African households as well as other general economic pressures.

Another trend the survey noted was a willingness to spend by South Africans – particularly more on experiences than on mere products. Deloitte has been tracking data globally for over a year including at least 1 000 consumers a month in each of the markets across income earning brackets.

Deloitte consulting consumer industry leader Rodger George said the Deloitte survey found South Africans’ comfort with being outside the home and social activities have improved since the beginning of the pandemic.

However, the willingness to spend has not recovered at quite the same levels, pointing to pressure on South African consumers’ income, he said.

“If a fourth wave [reaches] SA, the confidence will drop again, people will stay at home and do [fewer] social activities and if that wave subsides, we will see that confidence start to come back,” said George.

He said South African consumers were concerned about balances on their credit cards, ability to repay debt and blitzes in their savings accounts.

Higher levels of concern in SA

“Consumers are financially strapped. If you compare middle-income consumers with other middle-income markets, there are higher levels of concern about the ability to honour debts and this shows [that] consumers’ finances are strapped,” George said.

He said while consumers in South Africa generally expect things to improve in three years, more than one in three South African consumers live beyond their means and rely on credit to stretch their income, especially as prices rise.

“Up to 78% or more people are spending all of more than their earnings – 34% use a credit card, [and] 86% are concerned that prices for goods and services they purchase are going up, compared to global average of 68%. Out of all the consumers globally, South Africans are most concerned that prices will go up,” George said.

He added that online shopping in South Africa showed a behavioural shift as just before the Covid-19 pandemic; only 12% of South African consumers were buying groceries online and by the third wave it grew to 60%. This is expected to have double-digit growth in the next five years.

He said 68% of South African consumers’ wallets get directed towards less discretionary spending, compared to a global average of 65%. Internet connections and data are now being considered non-discretionary and more essential and the majority of discretionary spending goes towards entertainment and travel.

“The SA consumer has expressed a keen interest in saving, but will typically spend as much on saving as they do on takeout. Thirty-five percent of consumers would like to buy a new vehicle. This part of the survey was done at the end of October 2019, before the virus was discovered,” he said.

George said the survey “does not make for a great spending season for retailers in December”, but that people generally feel safer about going on with their business and spending.

“Retailers are in for a hard time. They will have to be smarter about how they package their products. They may have to look at smaller gift packages and focus more on customer experience. But the way the data is looking, it’s going to be a tough Christmas for all,” he said.

George said the data on South African consumers for the past year showed that South African consumers’ mindset shifted towards well-being, pursuit of purpose as well as activity and earning more.

By Jamie McKane for MyBroadband

Eskom’s proposed electricity tariff changes could see the electricity bill of average South Africans skyrocket, according to energy expert Ted Blom.

Eskom itself has rebutted these projections, however, stating that while certain customers may pay more and others less, the change will not lead to an increase in its revenue.

The power utility plans to reduce the electricity tariff for the peak winter months and hike tariffs for electricity usage during its summer period.

It has also said it wants to replace the inclining block rate tariff system with a new system that charges fixed network costs regardless of usage and separate electricity usage costs.

The inclining block rate system currently means that South African households that use more electricity pay more per kWh than those which use a lower amount of electricity every month.

Removing this would mean that all households would pay the same per kWh of electricity usage, regardless of how much they use each month.

Potential for massive bill shock – Ted Blom
Eskom has said these proposed tariff changes are being implemented to bring the prices consumers pay for electricity in line with the efficient cost of producing power.

Blom, however, has warned that those who do not use much electricity every month may see a significant increase in their monthly electricity bill.

This is because while Eskom has said it will reduce winter tariffs, it only charges these tariffs for three months of the year. During the rest of the year, it charges summer season tariffs, which it has said it plans to hike.

Blom says that depending on how much these tariffs are altered, this may result in a net increase in consumer electricity bills per year.

Additionally, the introduction of a fixed network cost could see those who use relatively little electricity paying much more than they currently do, Blom said.

This is because they will be required to pay fixed monthly costs for being connected to the electricity grid, and this charge will be incurred no matter how much they try to save on electricity usage.

These changes will be most felt by households that use electricity sparingly, Blom said.

Speaking to eNCA, Blom said households that cannot afford to buy a lot of electricity will face a heavy burden if Eskom goes through with these changes.

“Eskom hasn’t provided the exact breakdown, but as an example – on the first 300kWh of electricity, where you used to pay R1.29 you could now pay closer to R2, and that will double the average person’s electricity bill,” he said.

Some customers might pay more or less – Eskom
Speaking to eNCA following Blom’s statements, Eskom electricity pricing specialist Shirley Salvodi said that the changes to the summer and winter tariffs would be revenue-neutral for Eskom.

“The sum of all the changes we are making equals the Nersa-approved revenue requirements,” Salvodi said. “So by slightly reducing the winter rates and increasing the rates for the nine months in the summer, the sum of the two changes is revenue-neutral for Eskom.”

“But some customers might pay more or less, depending on their profile.”

Regarding the inclining block rate tariff changes, Salvodi argued that the projection that some customers will pay double is not strictly correct.

“The statement made that some customers are going to pay double is a bit misleading,” she said. “There are many customers that are actually going to see benefits from the changes we are proposing.”

In response to questions from MyBroadband, Eskom spokesperson Sikonathi Mantshantsha elaborated on Salvodi’s previous statements.

“The proposed change to our tariffs structure, reducing the three winter months and increasing the nine summer months, is calculated in such a way that the same amount of revenue will be received by Eskom,” he said.

“Eskom will not be earning any additional revenue from this change, and all of the changes must be approved by regulator NERSA.”

Removing the inclining block tariffs and the reasons are clearly spelt out in the power utility’s submission, Mantshantsha said.

“I encourage customers and Mr Ted Blom to read the document, understand the numbers and use the models Eskom has provided on our website.”

Mantshantsha added that customers who do not use a lot of electricity will not be required to pay these fixed charges.

“A point to note is that Eskom is not proposing to introduce fixed charges for low consumption customers, so there is always this tariff option available for these customers,” he said.

Dis-Chem fined R1.2m for hiking prices

By Sifiso Zulu for EWN 

The Competition Tribunal has found Dis-Chem pharmacies guilty of contravening the Competition Act by selling surgical face masks at excessive prices during the Covid-19 pandemic.

The retail group has been ordered to pay an administrative penalty of over R1 million.

Dis-Chem is alleged to have hiked the price by between 43% and 261%.

The tribunal said that the company abused its dominance when it hiked the prices.

Dis-Chem is appealing the ruling.

Source: IOL

South Africa’s Competition Commission told the Portfolio Committee on Trade and Industry that since the national disaster was declared in March, it had received a total of 1 354 complaints and tip offs from the public regarding inflated prices.

The committee was told that these complaints concern allegations that retailers, traders, suppliers and pharmacies are charging excessive prices for Covid-19-related products, including masks and sanitisers, personal protective equipment (PPE) and other essential goods and basic food items.

The complaints have been investigated in terms of Section 8 of the Competition Act, which prohibits excessive pricing.

According to parliament, some of the complaints relate to price increases of 1 000%.

“In two instances, firms pleaded guilty and agreed to pay a fine after the matter was handed over to the Competition Tribunal. Covid-19-related pricing investigations by the tribunal have so far led to 13 settlements through consent orders. The total value of the settlements is R12 854 694. Special Tribunal Rules for Covid-19 price-gouging matters to be heard on an expedited basis were also published,” a statement from parliament read.

The committee heard that government regulations relating to the national disaster prohibit dominant suppliers from charging excessive prices for certain specified goods and services, mainly basic food and consumer items, medical and hygiene supplies, and other emergency products and services.

“The Block Exemption regulations exempt categories of anticompetitive agreements or practices in some industries from applying Sections 4 and 5 of the Competition Act. The Commission said that authorities should be on high alert as the economy opens up, as some companies, such as airlines, may be planning to increase prices by up to 50%. Regarding the National Consumer Commission (NCC), the committee heard that from 23 March to 12 May, the NCC received 2 900 calls on its Covid-19 toll-free hotline.”

A total of 2 533 (87,3%) calls were answered and 367 (12,7%) were lost/abandoned. Of the 2 533 complaints received to date, 1 618 complaints alleged price gouging relating to regulated essential products. The remaining 915 complaints were not related to the regulation. These complainants were referred to the relevant platforms.

Committee Chairperson Duma Nkosi, said, “The committee will continue to engage with all its entities and the department in order to monitor their work, progress and support provided to South Africans, especially during the national disaster period.”

South Africa’s fuel price cap is on the way

Source: Supermarket & Retailer 

Energy minister, Jeff Radebe, has announced that the proposal to cap the price of 93 octane petrol will be finalised by the end of January 2019.

Speaking in a parliamentary Q&A session on Wednesday (31 October), Radebe said that the proposal has been circulated to the fuel wholesale and retail industries which have been asked to comment on it, reports BusinessDay,

“We are very serious about changing and putting a cap on 93 octane,” said Radebe.

He added that the cap would go a long way in alleviating pressure on consumers.

The confirmation comes after Radebe announced that Government was considering fixing a maximum price for unleaded fuel at the start of October.

“Government is deeply concerned by the rising cost of petrol in South Africa which is largely caused by the rand-dollar exchange rate and the price of crude oil,” said Radebe at the time.

He added that a task team, including officials from the Department of Energy and the National Treasury, are examining what to do to cushion the blow of another increase as the international price of crude oil has kept increasing.

Radebe placed a hold on petrol price increases for the month of September, with only a five cents increase added as part of an ongoing wage agreement.

However, this was followed by a record increase in October as the price of 93 octane fuel increased by 99 cents per litre, while 95 octane was increased by another R1 at the pumps.

November is expected to provide a slight relief for owners of petrol vehicles, while the price of diesel is expected to see another large increase.

SA consumers under the cosh

From today, consumers will pay more for fuel and should brace themselves for further increases including meat prices by the end of the year, say experts.

The price of petrol will increase by 44 cents a litre and diesel by 22 cents.

Gwarega Mangozhe, chief executive at the Consumer Goods Council of SA, says the higher price of fuel, which is directly linked to the weakening of the rand against the dollar, will inevitably impact on disposable household incomes which are already under pressure from other cost increases.

“Consumer spending is subdued and some of our members have noticed a change in shopping habits as consumers search for bargains, while some are prioritising their overall spend on groceries in light of tighter disposable incomes.

“While we remain confident that many of our members will experience a fairly busy festive trading season, the overall outlook remains uncertain given the predicted low economic growth during 2016.”

Momentum economist Sanisha Packirisamy, says the 43c/l under recovery in the price of petrol last month was largely a function of a 1.7 percent depreciation in the rand against the dollar between August and September and a 0.4 percent uptick in average monthly international oil prices over the same period.

Packirisamy says the Organisation of the Petroleum Exporting Countries (Opec) caused a 7 percent rise in international oil prices late in the month owing to a largely unexpected agreement by Opec to cut production levels.

“If oil prices persist at these levels there could be a further increase in petrol prices next month, should the rand stay at similar levels as well.”

She added the rand was also under pressure from heightened fears around a sovereign rating downgrade by Standard and Poor’s rating agency in December on the back of weak growth fundamentals and persistent policy incoherence.

“In our view, the expected rise in petrol prices still leaves the year-on-year inflation rate in private transport costs in the Stats SA consumer basket at reasonably low levels.”

Standard Bank economist Kim Silberman says the outlook for the remainder of the year was for the petrol price to continue to rise, which will add pressure to consumers’ disposable income.

Silberman says consumers spent on average 5.7 percent of their income directly on petrol, which added pressure to consumers’ disposable income.

“However, the effects of the fuel price are far broader than that and will most likely feed through to the price of public transport and the general cost of producing goods and services.

“We expect meat price inflation to accelerate in December.”

Neil Roets, chief executive of debt management firm Debt Rescue, says he expected further increases in the price of fuel towards the end of the year.

“The ongoing political bickering within the ANC and an extremely sluggish economy is likely to impact on the rand and it looks as if the price of crude oil may also be on the rise.”

Roets says one of the major effects of the fuel price increase on the economy would be the continued rise in the price of food.

“The announcement by the Red Meat Producers Association that the red meat price could increase by as much as R8 per/kg in the short term and that it could take between three to five years to restore herds following the severe drought, is bad news for consumers who are dependent on meat for their daily survival.”

Roets says the real elephant in the room was the expected downgrade by the ratings agencies later in the year.

“Despite all the efforts by the government to persuade the agencies that the economy was on the mend, they are not buying into the narrative and the reasons are clear: widespread corruption and parastatals like Eskom and SAA that are burning through taxpayers’ money at an alarming rate.”

Damon Sivitilli, head of marketing at city debt management firm DebtBusters, says the price of fuel increasing put more pressure on the already strained budgets of many consumers.

He says not only would the fuel hike and the resulting increasing cost of commodities choke consumers, it would also have a huge impact on small businesses across the country.

Sivitilli advised consumers to start reviewing their budgets by looking at their needs and adjusting their spending on luxuries in order to survive the economic and political turmoil.

“The repo rate went unchanged last month due to stable inflation rates, but the upcoming increase in petrol costs may put pressure on this once again and continue the trend of rising inflation and costs into the new year.”

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