Beware of higher inflation

Beware of higher inflation

Business, Human Resources

The Ukraine conflict has already had an impact on South Africa when we can least afford it, by increasing the price of fuel at the pumps. Together with the expected food price inflation stemming from a shortage of raw materials for fertilizer, we are in for a tough year. Consumers are already stretched in South Africa with many living from paycheck to paycheck.

The Reserve Bank has already acted by increasing the repo rate to fight inflation, but more is expected. For a household earning R25,000 per calendar month, a 1% increase in interest rates equates to an extra R833 on interest per month.

But it’s not only an issue for those with debt. Increasing interest rates are bad for equity and bond valuations, and pensions tend to take a knock as well.

For employers, this is difficult for several reasons:

  • Staff are under increased emotional stress caused by their financial situation
  • There is a higher likelihood of fraud
  • Employers will face pressure to increase salaries/wages in response to the rising cost of living

Unfortunately, there is no magic wand to make this go away. However, we do recommend giving some thought to the impact of inflation on your business. Plan now to address these challenges – including how you will implement price increases of your own – rather than waiting for the proverbial sword to hit when you are least prepared.

And you can always chat to us should you need some advice! Our team is ready and waiting – contact us on [email protected].