Triple blow for South African consumers

Consumers suffered a triple whammy this week, with stiff increases in electricity tariffs, a petrol-price hike and no interest-rate cut, the National Consumer Forum said on Friday.

“By far the worst of these three things was the National Energy Regulator of South Africa [Nersa] granting Eskom a tariff increase of 31,3%,” forum chairperson Thami Bolani told the South African Press Association.

“I am convinced that if Nersa had not permitted the hike, the Reserve Bank would have cut rates by 50 basis points,” he said.

Nersa’s decision put consumers in a tight corner.

“This will complicate matters for both consumers and small business.”

Bolani said granting an increase of this size in the face of an economic recession and across-the-board public opposition was both callous and irresponsible.

“We cannot allow Eskom to go on raping us like this,” he said, adding that the electricity supplier intended, in the near future, to demand yet another tariff hike.

Bolani said consumers would now face food price hikes, as higher costs would simply be transferred to them.

The forum understood the plight of farmers when it came to the electricity hike.

“We are holding a public meeting in Soweto on July 25, where we’ll be discussing responses to Eskom’s tariff hike,” he said.

On Thursday, Nersa announced it had granted state-owned electricity provider Eskom a 31,3% tariff rise for the 2009/10 financial year.

This was just short of Eskom’s request for a 34% tariff hike.

Also on Thursday, South African Reserve Bank governor Tito Mboweni said the bank’s monetary policy committee had decided not to reduce the repo rate due to inflation concerns.

And on Friday, the Department of Minerals and Energy said the retail price of petrol would rise by 37 cents to 40 cents a litre next week, dealing the final of three blows to already cash-strapped and debt-burdened consumer.

In a statement, the Automobile Association (AA) said the latest petrol and diesel price increases would definitely touch the pockets of consumers and commuters alike.

“It is expected that taxi fares will also increase in line with the latest fuel increase,” the AA said.

Anger
The Congress of South African Trade Unions (Cosatu) voiced anger on Thursday over the surprise central bank decision to keep interest rates on hold and said it would cost the country jobs.

Cosatu, which has threatened to strike if Mboweni does not soften his monetary policy stance, said the bank’s decision to keep the repo rate at 7,5% was “unbelievable”.

“The Reserve Bank doesn’t care a damn about what happens to the economy, job creation,” Cosatu general secretary Zwelinzima Vavi said in a telephone interview.

“Everybody else in the world has reacted to the current crisis by slashing interest rates to 0% and 1%, South Africa is just bucking the trend, moving to the opposite direction.
Very very angry, I must say.”

Cosatu and other unions want South Africa to scrap its policy of inflation targeting and to cut rates more aggressively to spur the economy, which has tipped into its first recession in 17 years, and safeguard jobs.

“It is disappointing, and the Reserve Bank is so conservative it is unbelievable,” Vavi said, adding the central bank was responsible for thousands of job losses this year.

“We know that we have very deep, deep differences with them and their approach, we think their approach has been very costly for South Africa’s economy.”

Solidarity union said in a statement keeping rates on hold “will only prolong the recession already plaguing the country”.—Sapa, Reuters

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