The increase in the retail price of petrol by 55 cents per litre will result in a ”period of anguish” for South African households, an economist said on Wednesday.
Absa economist Chris Hart said the increase would cause food prices to rise and fuel inflation.
Hart said the country was expecting a hike in electricity prices as well as an increase in the rate of taxes in the coming months.
”We will see a period of anguish. A significant number of households will lose their houses and cars because of the pressure of the high prices,” Hart said.
Household income would not keep up with the pricing pressure.
The Chemical, Pulp, Paper, Printing, Wood and Allied Workers ‘Union said the effect of the petrol increase on food prices was enormous.
Spokesperson Keith Jacobs said there was a need to have an indaba with the government on inflation and rising food prices.
”Although the Department of Minerals and Energy says it does not have control of petrol prices, we are not happy with this increase and would like to discuss the repercussions with them and other government departments,” Jacobs said.
Economist Mike Schussler said there was a possibility of a high interest-rate hike next month.
He said the petrol increase could lead to the Reserve Bank governor calling for an emergency monetary policy committee meeting.
South African Reserve Bank spokesperson Samantha Henkeman declined to comment.
”We do not comment on petrol prices,” Henkeman said.
She would not be drawn to comment on the effect it would have on interest rates.
Inflationary effects
Meanwhile, South African Reserve Bank Governor Tito Mboweni on Tuesday said that high food and fuel costs in South Africa have spilled over into second-round inflationary effects that have to be tackled.
He also, again, warned in an interview with CNBC Africa that an excessive increase in electricity prices will have serious consequences for inflation.
The targeted CPIX (consumer inflation less mortgage costs) inflation gauge jumped to a five-year high of 10,1% year-on-year in March, raising speculation that interest rates may have to rise again.
The data came out last week. Earlier this month the Reserve Bank lifted its repo rate by 50 basis points to 11,5%, adding to eight half-percentage point increases since June 2006.
Mboweni said the bank’s central forecasts had showed inflation getting worse before it got better.
”So, it was very important for the monetary policy committee [MPC] to have to tighten the monetary conditions in order to ensure that going forward inflation does come down,” he said, referring to the April 10 rates decision.
Mboweni said high international food and oil prices had been the spark for higher inflation, but pressures were now more widespread.
”Food and oil have been the original sins … [but] the impact of the increases in the prices of food and oil have now spilled over into the other categories of the inflation basket, second-round effects.
”The central bank has to try to ensure that these second-round effects don’t get out of control.”
Consumer demand needed to be dampened further and inflation expectations, which rose sharply in the first quarter of the year, had to be contained, he said. — Sapa, Reuters