Rising inflation continues to threaten SA consumers
Statistics South Africa said last Wednesday the June Consumer Price Index (CPIX) jumped to 11.6 percent year-on-year from May’s 10.9 percent, while the all-items consumer price index (CPI) increased to 12.2 percent from 11.7 percent.
On a monthly basis, CPIX was at 1.1 percent in June.
Analysts said the rise in inflation was likely to result in another increase in interest rates, which have risen consistently for the past nine months worsening the plight of South Africans in debt.
“This returns the focus to the terrible near-term outlook for inflation rather than the much more favourable 2009 outlook,” said Jeff Gable, head of research at Absa Capital.
The Reserve Bank has set an inflation target of between 3-6 percent, but rising commodity prices in South Africa, spurred partly by a surge in global economic fundamentals, has led to the bank failing to meet its target.
South African Reserve Bank Governor Tito Mboweni said recently measures to deal with surging South African consumer prices would “hurt”.
Mboweni told a local daily there was more to come in the form of economic stabilisation measures and that “it will be painful”.
A spate of interest rate hikes and slowly rising inflation have forced many South African home and vehicle owners into massive debt, amid warnings from the country’s central bank governor that economic fortunes are likely to worsen for Africa’s strongest economy.
Auction companies have estimated that more than 55000 families would suffer mortgage stress by September and 8000 could lose their houses due to interest rate rises, amid signs that debt levels, particularly in the middle income group, are rising rapidly.
More than 1000 houses were being sold in execution, repossession and insolvency auctions countrywide.
The central bank has continued to raise interest rates in an effort to reign in wayward inflation that has fallen outside of its 3-6 percent target band, but critics say the rate hikes are doing more harm than good.
Labour union Congress of South African Trade Unions (COSATU) described last month’s interest rate increase as a “cruel blow” to South Africans already trying to recover from the previous nine increases.
Another hike next month would virtually cripple consumers in Africa’s strongest economy.
Sharp rises in the costs of petrol, milk and bread, and a series of interest rate hikes meant to clamp down on inflation have inspired labour’s determination to change government policies.
“Yet again people – who are already battling the effect of runaway increases in the cost of food and fuel, and who face the prospect of a massive rise in electricity tariffs – now have to try to scrape together more scarce rands to pay even more interest on their bonds and loans,” Cosatu said in a statement.
COSATU carried out a one day strike action to voice its “disgust” at the rising cost of living two weeks ago.
Thousands of South African workers took to the streets in four of the country’s ten provinces to protest against the rising cost of living the country.
COSATU, an ally of the ruling ANC, said its nearly two million members wanted government to pay more attention to workers.