The DA's plan to protect the poor from increases in the cost of living

Note to editors: The following statement was distributed at a press conference held in Johannesburg today by DA National SpokespersonMmusi Maimane, and DA Shadow Minister of Finance, Tim Harris MP. 

In recent months, South Africans have been subjected to significant increases in the cost of living. Electricity, fuel, food and public transport have all become much more expensive in a matter of months; with many more increases still on the way. E-tolling, increases in rates and taxes in some municipalities and increases in the cost of water are likely to hit in the near future. 

Some people believe that the increasing cost of living is purely due to external factors and that we are powerless to act. There is in fact a great deal that government can do to help shield poor South Africans from rising prices. 

We will therefore demand a Parliamentary debate on the rising cost of living as soon as Parliament reconvenes. Our Shadow Cabinet will use that opportunity to fight for the implementation of the set of proposals we announce today.

Over the next few weeks, DA delegations will meet with ordinary South Africans to discuss their feelings about the increase in the cost of living. We will take their messages to government, to fight for the cost of living to be contained.

We will also be convening meetings with key government departments and entities to discuss the implementation of our policy proposals. We will meet with the National Energy Regulator of South Africa (NERSA), the South African Reserve Bank (SARB), Statistics South Africa (STATS SA), the South African Petroleum Industry Association. (SAPIA), the Central Energy Fund, the Competition Commission, Metrorail, the Passenger Rail Agency of South Africa (PRASA), AGRI SA, PETRO SA and iGas.

On top of this, we will request meetings with the Ministers of Energy, Agriculture, Forestry and Fisheries, Finance, Trade and Industry, Economic Development and Transport. We will approach every relevant Minister and entity to ensure that they understand the pain South Africans are feeling.

Government has chosen to do nothing, and in many cases to worsen the situation. We will drive this campaign until government is forced to take action. It is not right that ordinary South Africans are suffering and government is sitting idle. We cannot tolerate this.

Our research has revealed troubling statistics that back up the experiences of frustration and difficulty that ordinary South Africans have shared with us.

Between December 2011 and April 2012, the price of important goods and services necessary for day-to-day survival increased dramatically. We used the following goods and services as an indicator for the rising cost of living:

This is unfortunately a continuation of an already painful trend. The cost of a basic food basket has increased on average by 16% per year for the last five years, the price of electricity has effectively increased by 82.3% in the last three years, petrol prices have increased on average by 11% per year for the last decade and Metrorail's ticket prices have effectively increased by 69% in the last three years (Metrorail's increases vary slightly across the country).

When prices increase at this rate, significant pressure is exerted on the poorest South Africans. Literally millions of people will be forced to decide what to cut from their budgets this month. 

For example, if you are a machinist working in a textile factory, your monthly income totals roughly R2100 per month. In this scenario, you are simply not able to afford an increase of several hundred rands per month in the cost of living. The inevitable outcome is that you will have to cut expenses from your budget. The question is, can people who earn at this level afford to cut even further from their budgets?

It is with these workers in mind that we launch this set of policies today.

Our proposals to contain the increases in the cost of living, and defend our people's living standards, include the following:

• Better tracking of the relative inflation experience of poor South Africans so that government can stay in touch with the experience of poor South Africans and make more informed policy decisions.
• Changing the way the fuel price is calculated to lower prices. The fuel price should be reviewed to reflect long-term fundamentals in the global oil market, and not short-term fluctuations based on speculation in the oil market. This will smooth prices out over time and avoid painful hikes.
• Changing our approach to electricity pricing to shield South Africans from above-inflation increases. South Africans are currently not only paying for the electricity they consume, but also for the construction of new power plants. This results in unnecessarily high electricity tariffs. They should only have to pay for the electricity they consume - government should create public-private partnerships and seek investors to fund power plants so that those assets can pay themselves off over time.
• Root out anti-competitive behaviour amongst food retailers and suppliers. We would strengthen the competition commission so that it can eradicate all anti-competitive behaviour and price hiking in the food retail market, which drives up prices and punishes the poorest South Africans.
• Reforming Metrorail to lower prices in the long run. We would improve Metrorail security to avoid vandalism and copper theft and clamp down on free riders to enable us to manage price increases to be closer to inflation.
• Using a smarter food export strategy to prevent expensive imports where necessary. This will help our food traders make more informed decisions in order to avoid situations where we export food items at low prices and import them at higher prices, like we did this year.
• Reforming the liquid gas industry to lower the price of liquid petroleum gas. Currently this industry is government-run, jeopardising stability of supply and keeping prices pegged at a relatively high level. By promoting competition and deregulating this industry, we can attract private sector role players, encourage competition, improve efficiency and drive down prices over time, all the while ensuring better security of supply.
• Making better use of the strategic petroleum reserve to smooth out the impact of fuel price increases. We should tap into the petroleum reserve to help ease the impact of oil price hikes on the fuel price we pay at the pump. Conversely, when oil prices go down, we should slowly introduce reductions in the fuel price, to enable government to top up the strategic petroleum reserve again. This will moderate price fluctuations over the long run.

A full description of our proposed solutions can be found here.

The reality is that the poor can only share in our economic growth to improve their lives when growth is firstly fast enough to create large numbers of jobs; and secondly if their incomes are growing relative to the cost of basic living conditions. Currently, government is failing to achieve either one of these goals.

That is why we are stepping in to propose solutions to these problems. Our alternative vision for South Africa is focused on achieving job-rich 8% economic growth and improving people's living conditions by ensuring that their income grows faster than their cost of living. That way, people will have more money to invest in their children's education, in their own retirement or in their homes.

This is the only avenue to a better life for all.

* Basic food basket includes 1kg each of beef, chicken, carrots, onions, 750 ml of sunflower oil, 5 loaves of bread and 5kg of maize meal. Based on information from the National Agricultural Management Council.

** Based on information from Eskom.

*** Based on information from SASOL.

Statement issued by Mmusi Maimane, DA National Spokesperson, April 18 2012

Click here to sign up to receive our free daily headline email newsletter