Without two incomes, SA families can no longer survive
New Gauteng rates increases a devastating blow on top of other utility price hikes, says economist
The stark reality is that if there is not a double income per household, families simply cannot survive, says labour economist Andrew Levy.
And, says the head of department at the Wits School of Economics and Business Sciences, Professor Jannie Rossouw: “We have already reached that point where municipal bills are too high for people to pay.”
Speaking at the launch of his labour monitor that tracks what people earn and their expenses, Levy said inflation for what people spent most of their money on – transport, electricity and food – was way above salary inflation.
Levy is working out what people spend money on so that when companies and unions bargain about wage increases, they can have a better idea of what a wage needs to be and meet increases in consumer prices.Consumers in Gauteng especially will bear the brunt of significant increases on their municipal accounts, after three metros there announced their budgets last week.
On top of the VAT increases from 14% to 15%, water, electricity and sewerage increases have been announced by the three municipalities in Gauteng.
Johannesburg residents will pay 14% more for water, sanitation and sewerage services.
Pretoria’s water bills will rise by 10.2% and Ekurhuleni's by 12.95%. The municipalities are paying 12.95% to Rand Water for the provision of water and consumers are bearing the burden.
Electricity increases across the Tshwane metro will be between 5% and 8 %.
Johannesburg residents will pay just over 7% more for electricity.
The news of the above-inflation rate hikes comes on the back of three petrol price increase in as many months. Petrol rose 69c to 72c in April, with 52c of that due to an increase in fuel taxes. Owing to a weak rand and rising oil prices, petrol rose 49c at the beginning of May. The Automobile Association expects it to spike another 80c next month.As salary and social grant increases don’t rise in line with living costs, “people are getting poorer every year”, said researcher Julie Smith from Pietermaritzburg agency Community Social Action.
“People ask us what citizens can do to weather increases. The answer is nothing. Households have done everything they can to cut food and electricity expenditure already.”
Levy said “people were getting poorer as money was losing value”.
His work showed that if a household doesn’t have two people working, it cannot survive.
Rossouw said: “The average South African is under serious pressure and it is getting worse.”
But the pain they are feeling is not of their making – it is the result of maladministration, he said.
The middle classes had house and car debt and were feeling “squeezed”.
“I would not be surprised if we get another tax increase next year,” Rossouw added.
“Free tertiary education is being phased in over five years. The money must come from somewhere.
“The only thing the average South African can do is postpone consumption by driving your car for longer and wearing clothes for longer.”Many of the increases announced last week are way above consumer price inflation. The Ekurhuleni metro is increasing sanitation rates by 9%, and refuse removal by 7.5%.
Last week, Auditor-General Kimi Makwetu said he was worried about the sustainability of four of the country’s eight metros – Johannesburg, Tshwane and Nelson Mandela Bay – while Manguang is “in a particularly vulnerable financial position”.
More than 100 municipalities are bankrupt.
With rising costs, there was no rate-cut relief for middle classes either last Thursday when the monetary policy committee at the Reserve Bank kept the bank lending rate unchanged. Rate cuts reduce interest rates, thus reducing the cost of credit card, loan, car and home repayments.
Middle-class, self-employed knife maker Tim Flack remembers when he and his then wife could spend R800 a month for food in 2008. Ten years later, food and household groceries cost him and his partner up to R4,000. That is double what they paid three years ago. He is hoping that his decision to quit smoking two weeks ago will free up about R1,000 a month. He smoked a pack and a half a day.
Flack said the couple cut costs by living on a smallholding outside of Stellenbosch. They worry about security due to the frequency of intruders, but they cannot afford the rent in Cape Town.
He said he was very concerned about rising water costs in Cape Town.
“We always used to have money left over at the end of the month. But now to get by we are using the credit card more and more. It’s a vicious cycle. We are going into more and more into debt.”Rossouw said the government needs to cut its own expenditure to reduce the need for more taxes, by having a smaller cabinet and smaller motorcades.
Economist Mike Schussler said water rates have been increasing above inflation for more than a decade, with water and electricity becoming a very big expense. “The problem is everyone needs water. The middle class is struggling to get money together for water and electricity.”
“Only about 60% of water is paid for and the other 40% is lost to leaks or not paid for. But if municipalities feel they can keep increasing bills, they don’t have an incentive to stop leaks and water loss.”