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South Africans are currently facing major economic headwinds, with a myriad of issues taking their toll.
For instance, according to Stats SA, consumer price inflation has continued to stay at a high level – growing from 7.0% in February to 7.1% in March.
The South African Reserve Bank has responded by hiking interest rates, with its latest 50 basis points hike increasing the repo rate to 7.75% and the prime lending rate to 11.25%. Many experts also believe that the SARB’s Monetary Policy Committee (MPC) will raise interest rates again this month.
Moreover, load shedding has damaged the local economy and has destroyed the country’s economic growth prospects for 2023 while also affecting rising inflation.
Due to the high costs facing South Africans, we have decided to compare the price of five items from 2013 to 2023 – ranging from a burger to a house – to see if South Africans are indeed paying significantly more for products.
We decided to include inflation-adjusted prices as well for a fair comparison. Below are the results of our test:
Big Mac
The price of a Big Mac has grown by well over 100% in South Africa in the last decade, increasing by 45.23% when accounting for inflation.
Despite the large price increase, according to the Economist’s Big Mac Index, the rand is still undervalued against the dollar.
The Big Mac Inxes is used to determine if currencies are priced at the “correct” level, and is based on the purchasing-power-parity (PPP) theory – exchange rates will move towards the rate where they equalise the price of goods and services in any two countries. The Big Mac is chosen due to how widely accessible it is across the globe.
A Big Mac costs R49.90 in South Africa and $5.36 in the United States, with an implied exchange rate of R9.31.
However, the actual exchange rate of over R17.21 (index was published in January) indicates that the rand is 45.9% undervalued.
Petrol
South Africans are currently paying large amounts for petrol, with the current over R18/$ exchange rate and the high price for oil – worsened by the Russian invasion of Ukraine – affecting prices.
However, when accounting for inflation, the petrol price is only 4.7% higher than it was in 2013. This is an increase, but not as pronounced as it has been made out to be.
South Africans will likely still have to deal with high fuel prices for the rest of the year, according to Jalpa Bhoolia and Koketso Mano from FNB Wealth and Investments.
They said that the US Federal Reserve would likely hike interest rates by 25 basis points (which it did), with the European Central Bank (ECB) also expected to reign in wage growth.
“Rising real rates in these advanced economies, while South Africa’s current account falls into deficit territory and local structural constraints mount, should continue to weigh on the rand and worsen local price pressures,” FNB said.
However, prices should still remain below the post-lockdown highs experienced last year, with volatility in the market also keeping the outlook fluid.
DStv Premium
Multichoice increased the price of DStv Premium by 4.8% in 2023 – going from R839 to R879. This was slightly above the average of 4.3% across its satellite pay-TV portfolio.
“[The price adjustment] is far lower than the projected CPI for 2023,” MultiChoice said in a statement.
When accounting for inflation, DStv premium’s price has actually dropped by nearly 15%.
In the last ten years, the media landscape has changed dramatically, with a host of streaming technologies introduced.
Netflix and Amazon Prime Video were introduced in 2016, Apple TV+ came in 2019 and Disney+ came to South Africa last year.
Multichoice has its own streaming service – Showmax – and recently announced a new partnership with Comcast’s NBCUniversal and Sky.
“It will build on Showmax’s success to date and strive to create the leading streaming service in Africa,” Multichoice said.
The service will incorporate Multichoice’s investment in local content, while NBCUniversal and Sky will provide international content.
Electricity
Despite South Africans being subjected to ever-worsening load shedding, the price for electricity has increased by nearly three-quarters over the last 10 years when accounting for inflation.
At the start of the year, energy regulator Nersa approved an 18.65% increase in electricity prices for 2023 – which was implemented on April 1. A separate 12.74% hike is planned for next year.
The increase is still less than the 32% increase requested by Eskom but is still significantly higher than inflation.
Nersa said that the decision kept in mind the country’s difficult economic situation, such as high-interest rates, low growth, high unemployment and load shedding.
Despite the major increase in electricity prices, Eskom said that the winter months will severely strain the national grid, with thousands of megawatts offline due to breakdowns and planned maintenance.
House
South Africa’s property market is seeing the biggest price drop when accounting for inflation, dropping by 25%.
The slowdown in house prices is especially pronounced in the current economic climate.
According to ooba Home Loan’s Q1 2023 oobarometer, the national average purchase price for property in South Africa was R1,434,448 – an only 0.8% increase from R1,422,992 in Q4 2022.
Data from the barometer indicates that homebuyers are taking advantage of the competitive interest rate that country’ banks are offering. .
“However, while the market remains competitive and has recorded steady activity levels in the first quarter of 2023, multiple recent interest rate hikes have had a dampening impact on consumers whose disposable income is coming under pressure,” Rhys Dyer, CEO of ooba Home Loans, said.
The 0.8% sideways trend will likely concern property sellers in the near term, but Dyer said that slow property price growth will welcome prospective homebuyers who have waited to enter the property market.
“Slowing house price inflation (HPI) means that properties are becoming more affordable, relative to household incomes,” he said.
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