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Price hikes major blow to battered consumers

| Economic factors

In addition to an expected big increase in the price of red meat, consumers should also brace themselves for an 18 cents a litre hike in the price of petrol.

Which in turn will have a knock-on effect on the prices of all other commodities, warned Neil Roets, CEO of debt management firm Debt Rescue.

The volatility of the rand also remained a problem affecting the price of imports negatively.
 
“We are on the eve of a perfect storm which is going to affect everybody, but especially the poorest of the poor who spend more than 50% on food,” Roets warned on Wednesday.

He added that, while many people will likely be going hungry, there is no prospect of famine like that which is now being experienced in some other parts of Africa.

“We have one of best developed social support structures in Africa with a variety of grants to the poor and the indigent. The bottom line, however is that this grant money will only pay for the basics,” explained Roets.

“The food shortages caused by the severe drought earlier this year has worked its way through the economy and the prices of all food have risen substantially."

He said further increases could be expected as SA will have to import large amounts of food such as maize and wheat where producing areas were particularly hard hit.

As for interest rates, Roets said he would not be surprised if the SA Reserve Bank increased the repo rate by 125 basis points, because inflation in general and food inflation in particular have become "a long shadow hanging over government", according to economist Dawie Roodt.

Roets added that the fact that most consumers owed more than 75% of their monthly salary cheques to financial institutions shows just how dire the situation actually is.

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