The announcement of a VAT price hike of 1% from 14 to 15% last month was a blow for the South African consumer. Prices for everything except food and energy is expected to grow by 2.4% compared with last year’s 1.7%, according to Kiplinger.com, while medical care will go up 2.8% versus 1.6% and all other services will cost 2.8% more compared with 1.8%. Higher inflation means that the Federal Reserve will keep boosting interest rates too. Three more hikes are expected in 2018 with could see central bankers raising rates later this year.
Tyre prices are also expected to rise which is not good news for the hard-pressed consumer. Historically seen as a ‘grudge purchase’, experts are warning that hard times could find the consumer opting for sub-standard products when replacing tyres which although cheaper, are potentially dangerous.
Said one retailer: “We are seeing a greater number of motorists arriving at our store with tyre failures caused by fitting less reputable, or in some cases, even second-hand tyres to their vehicles. We do everything in our power to explain the dangers of this practice to the customer but are not always successful. Often they simply say that this is all they can afford.”
To make matters worse, South Africa’s four local tyre producers will all be raising their prices this year.
Said Riaz Haffejee, CEO Sumitomo Rubber SA: “There are several variables that will impact the prices of tyres this year, most notably the cost variabilities in operations. In my opinion, consumers are looking at a CPI related increase across PCR, LTR, SUV and TBR product ranges.
“The timing of planned price increases usually depends on companies’ financial year periods, however, there are factors that can result in price increases at other periods of the year. These factors are usually driven by the macro environment that businesses have limited influence over. Unfortunately, one can never guarantee that there will be a single price increase per year,” he said.
Similarly, Bridgestone SA CEO Gavin Young confirmed that Bridgestone SA would be implementing a price increase of between 4%-8% effective April 1st.