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This month, you’ll be expected to dig even deeper into your already emptying pockets in order to afford the mere basics – bread, grains, oil and petrol.
However, as the fuel prices rise from the first week of June, financial expert Thobelani Thwala advises consumers not to panic. Rather start considering alternatives to adjust to the upcoming increase in the cost of living, says the financial planner.
“Look out for alternative models of transportation such as carpooling until petrol prices go down again. Budget and stick to it or get a side hustle to cater and close a gap in your budget against inflation. Maybe ask for a salary increase.
“Work home from if that’s an option for you [and] cancel services like gym membership and create a home gym or alternatives such jogging,” he says.
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“The expectation is the fuel prices will go up by between R2,27 and R2,36 a litre plus the increase in levy by R1,50, which will push petrol to more than R25 a litre, according to the Central Energy Fund (CEF),” Thobelani explains.
“Inflation is then expected to increase . . . which will lead to an increase in the cost of supply chain, etc. and ultimately leave the consumer to bear the increase.”
We hear talk of “inflation”, but what does it really man for the ordinary person who feels the impact of a rising cost of living but doesn’t understand the economic terms?
“Inflation is the general increase in prices of goods and services that leads to a decrease in the value of a purchasing power. This basically means that R100 today will be worth much less in June in terms of what it can get you,” Thobelani told Drum earlier this week.
What this means for the ordinary South African is that our transport costs, food prices and those of essentials are guaranteed to go up. “We certainly need to brace ourselves for tough times ahead as this could have a rippling effect as it could lead to more inflation,” Thobelani says.
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It’s a vicious cycle. When consumers have less purchasing power because they have less money to be able to pay for goods and services, there’s less demand so the cost of things goes up.
“The purchasing power is measured using Consumer Price Index (CPI),” explains Thobelani. “This can even tell you the difference between inflation rate as defined above versus real inflation.”
There are various causes of inflation shared by Thobelani, and the most notable is an increase in the cost of production of goods and services.
“As per our case above this happens due to factors such as that of the rise in fuel,” he says, “which leads to an increase in transportation, etc. Other [causes] include an increase in the demand of goods versus shortage in supply because demand for limited goods and services will push the prices up.”
An increase in the circulation of the rand can also cause inflation, he adds.
“The government, through the Reserve Bank, can supply more money in attempt to lower interest rates, increase investment, etc, which leads to more money in circulation and in the hands of consumers, which will lead to an increase in spending. This then causes inflation.”
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