South African consumers are buckling under the pressure of rising inflation caused by the sharp fuel price increases triggered by the U.S.-Israel war on Iran.
The country's annual consumer inflation rose to 4 percent in April from 3.1 percent in March, according to Statistics South Africa.
Fuel prices rose by 18.2 percent from March, the steepest monthly increase since the current consumer price index series began in 2008, according to the agency.
Juby Raja owns a popular restaurant in one of Johannesburg's northern suburbs. She said that her business has taken a turn for the worse ever since the war on Iran began in February.
"It has been a very, very tough time. I have to say from February things just are not the same, I can already see it here with the customer turn out at the shop; feet are not coming in anymore. So, I think people are sort of more wary of spending their money," said Juby Raja, a restaurant owner.
On May 28, the South African Reserve Bank, the country's central bank, raised its repurchase rate by 25 basis points to 7 percent, citing rising inflationary pressures linked to higher fuel and food costs amid growing global uncertainty.
"We had levels of inflation that were actually going down, and that was starting to open up a bit more of a positive gap on real disposable income, so consumers essentially had more money in their wallets to spend on non-discretionary items. We also had the expectation at that stage that the Reserve Bank would actually cut interest rates following on from lower inflationary prints, and that would have alleviated the debt burden for consumers who had any form of a home loan, a car loan, or any sort of prime-linked debt. We are now sitting in a very different environment of post-Iranian conflict," said Sanisha Packirisamy, chief economist at Momentum Investments.
Despite another shaky ceasefire deal, uncertainty over the Strait of Hormuz is keeping oil prices elevated, leaving consumers with little disposable income, according to experts.
"Unfortunately, South African consumers are finding themselves increasingly squeezed at the moment that we're sitting in a point where our inflation is increasing ticking over month by month, and that's of course not just the pressure we're finding at the petrol pump but our grocery bills as well. And unfortunately, inflation is going to still continue to increase overall and we find in the local economy is about a four to six- month lag effect from where we have something spiked like in fuel prices, and how that feeds into our broader inflationary basket. So, we've got a bit more pain to come," said Casey Sprake, market strategist at AG Capital.
Iran war triggers inflation squeeze on South Africans
Iran war triggers inflation squeeze on South Africans
