SA consumers in for a rough ride

The rand is getting stronger, but it’s not enough to save us from the wrath of the rampaging oil price.

South African consumers are in for a rough ride and can expect to be hit by the cost of petrol, electricity, washing powder and pretty much anything packaged in plastic.

Monday’s oil price is at $68-a-barrel, having increased by almost 100% since the $35-a-barrel level seen in January. At the same time, the rand has strengthened from its weakest point of R10 to the dollar at the beginning of the year to about R8 today.

According to Tony Twine, director and senior economist at Econometrix, while the strengthening rand provides a “partial cushion” to the rising oil price, it’s not enough to protect the consumer.

The cost of coal, which takes its lead from the crude oil price, inevitably increases alongside the fuel price. This could well lead to South Africans having to pay more for electricity in the near future.

The price of petrol will also increase once again, says Twine—probably at the beginning of July—if matters don’t change drastically.

Increases will also filter down to solvents, which means that washing powder, floor polish, paint and laminated paper will become more expensive.

Another major price rise will be in plastics. Oil is a fundamental feedstock in the creation of plastics, and this will effect all plastic goods, as well as the cost of plastic packaging.

“The rand would have had to appreciate by 50% to cancel the effects of the high oil price,” says Twine. But that wouldn’t necessarily be a good thing, he adds.

“We are a two-way trading nation,” says Twine.

“If the rand strengthens by too much, we will start to lose jobs.”

Ultimately, it’s a trade-off. The high oil price and expensive dollar price will make goods and services more costly for the SA consumer, but it seems that we have to be a nation of martyrs, and live with it in order to keep exporting, and hence, keep our economy alive.

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