COST OF LIVING: How much more pain can consumers absorb?

COST OF LIVING: How much more pain can consumers absorb?
Producers blame high input costs, increased transport expenditures as well as high costs of raw materials for making costs of their products unaffordable. PHOTO | Courtesy

Petrol and diesel prices have again increased, to a record Rwf1,359 and Rwf1,368 respectively effective April 4. This is a fourth hike since October 2021 when costs jumped from Rwf1,088 and Rwf1,054 respectively.

Fuel costs in the latest review are the most expensive ever recorded in the country in recent years, and will likely see producers and manufacturers, yet again, hike prices of products to levels beyond reach of majority in the low income earner and the poor brackets.

Cost of commodities were already on a worrying trend especially after the war in Ukraine broke, triggering rise in gas and oil prices globally as well as hurting imports of key products and raw materials.

But even before the Russia-Ukraine crisis there were concerns over inflation mostly linked to the pandemic-induced restrictions that impaired supply chains even as they suppressed sources of incomes and work opportunities.

It is understood that the inflation situation could have been much worse if government had not offered subsidy to cushion against spikes in cost of essentials. Government has been foregoing fuel levies to the tune of billions francs since March last year.

Record rise

However, the impact of this is yet to be felt by the consumers who continue to contend with the constant rise in cost of things ranging from energy, basic foodstuffs, education and transport. Many rose to record levels over the past four months.

For instance, spikes in cost of food, transport and utilities pushed urban inflation in the country to new high at 5.8 per cent in February. Inflation had climbed to 4.3 per cent in January this year from 1.9 per cent in December 2021.

According to the latest Consumer Price Index (CPI), the gauge of changes in the cost of living in Rwanda published by the National Institute of Statistics, there was a 7.9 per cent and 4.5 per cent jump in prices of ‘Food and non-alcoholic beverages’ and ‘Housing water, electricity, gas and other fuels’ respectively.

Cost of transport rose by 4.8 per cent on annual basis.

The March inflation report is expected in a week time, but producers blame high input costs, increased transport expenditures as well as high costs of raw materials for the current food costs crisis.

The commercial farmers just like the manufacturers say high expenses on diesel or petroleum alone lead to high cost of production. In other instances, these factors discourage many from investing or expanding production/operations as they erode their profit margins.

Suppliers say fuel cost rise since October keeps sending costs of transporting goods up. Charges for moving a kilo of fresh produce from the provinces to Kigali markets has more than doubled and counting, and it is passed on to the final consumer.

So I’m shocked whenever I hear some of our officials telling the public that no reason whatsoever justifies why costs of local produced stuff should spike. They even forget to think that when cost of some essentials rise consumers’ attention turn to those that are relatively cheaper thereby uqually sparking high demand that prompts the price rise.

Hardship

It is, therefore, irrational to expect the prevailing food crisis to end by itself when nothing is being done about the issue at its root. I read diversion in the attempt to blame this cost of living crisis entirely on the war in Ukraine as if we have nothing to fix locally to end it or at least lessen its gravity.
The war in Europe only exacerbated an existing bad situation.

Where I live, tenants who are being evicted from accommodation for failure to pay rent are getting crowded in tiny rooms as living gets harder.  These are largely people who lost incomes and work opportunities as a result of the pandemic and kept reeling under the rising inflation since, and can hardly afford paying rent on their own.

They end up in a situation where one rents a room that he or she shares it with four or six others. Others only come in at night to not attract the attention of landlords who may kick them out in case they get to know. But this only works for bachelors. It’d not be easy for families.

This illustrates how the cost of living crisis is forcing individuals and families to resort to negative coping mechanisms in a bid survive. You would wonder how many are skipping meals, those who have scrapped important items from their menu or those going to bed hungry and losing hope by day.

Going by the level at which cost of things went up, a family needs almost three times the amount of money to purchase the same items they used to find within existing means. This is happening at a time incomes were partially or entirely lost due to factors that pre-date the Russia-Ukraine war.

Basically, many families can no longer save. Apparently those who can survive are luckier.
Now it begs the question: how much more cost pain can they absorb?