INFLATION EXPECTED TO PICK UP IN SOUTH AFRICA

JOHANNESBURG– South African consumers have been warned to brace themselves for a higher cost of living in the months to come as there are more upside risks to inflation and it is believed that the inflation rate will edge up towards the higher end of the target bracket.

Economist Isaac Matshego said Wednesday that the weakness of the Rand and a possible tariff hike by power utility Eskom posed significant risks to inflation in South Africa.

At the same time, consumers’ disposable income is being eroded by the increasing cost of goods and services.

The weakening rand and higher oil prices have led to a rise in fuel prices this month. A litre of petrol now cost 14.97 Rand (about 1.18 US dollars) following a 0.49-Rand increase. Meanwhile, The Value-Added Tax (VAT) rate has gone up one percentage point to 15 per cent.

There is also the possibility of an electricity tariff increase. The National Energy Regulator of South Africa (Nersa) will in the next month announce its decision on Eskom’s application to claw back some 67 billion Rand in costs through higher tariffs. If granted, an increase will push inflation higher.

Matshego does not believe there will be further interest rate cuts in the foreseeable future. He says that depending on the rand’s weakness level and international oil prices, inflation will edge towards the upper end of the target bracket and possibly breach the 6.0 per cent level.

Source: NAM NEWS NETWORK