Increases in business costs might soon be passed onto consumers

South African Chamber of Commerce and Industry SACCI CEO Neren Rau. South African Chamber of Commerce and Industry SACCI CEO Neren Rau.

“BUSINESSES under pressure from increasing costs might soon start passing the increases on to consumers, resulting in consumers having to pay more for goods”, South African Chamber of Commerce and Industry (SACCI) CEO Neren Rau said on Tuesday. This is according to Business Day Live.

This is supported by the weaker rand, which depreciated to a five-year low of R10.89/$ at on Tuesday, thus making imports costlier.

"The weak rand not only causes input prices for businesses to be more expensive, but there is an inflationary effect as well because of the price increases," Efficient Group chief economist Dawie Roodt said on Tuesday.

Small and medium-size enterprises are the engine of job creation in the country and are worried about the high cost of doing business, including electricity prices and municipal levies, and the cost of complying with regulations.

"The capacity of businesses to absorb costs is diminishing rapidly and these costs will have to be passed on to consumers," Mr Rau said in an interview.

"Retailers and manufacturers have been absorbing high and rising costs and at some point they are likely to be forced to pass these costs on to the consumer, regardless of the stubbornly weak outlook on consumption demand," said ETM Analytics economist Jana le Roux.

Costs are taking their toll on consumers and businesses, according to Debt Rescue CEO Neil Roets. He said the past two weeks had seen nearly double the number of clients seeking help compared to the same period last year, mainly following the implementation of e-tolls in Gauteng. This is because Some of Debt Rescue’s new clients are small business people who operate vans and trucks, which are tolled at much higher rates than passenger vehicles.

According to Business Day Live, under-pressure businesses and consumers, contained inflation and sluggish economic growth are among factors that are expected to support the case for interest rates to remain on hold when the Reserve Bank’s monetary policy committee meets later this month.

About 25% of the 64 businesses surveyed by SACCI planned to hire staff, while 21% said they would need to shed jobs. Business confidence remained very weak last year due to low economic growth and strikes.

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