No end to high prices in sight

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By Mathabana Kotelo

MASERU — Consumers seem nowhere near getting a significant reprieve from the high food, fuel and transport prices in 2014, according to the latest inflation report.

Consumer inflation year-on-year went down slightly to 5.1 percent in December, according to the latest Con­sumer Price Index report by the Leso­tho Bureau of Statistics.

Month-on-month inflation went down to 0.2 percent from last month’s 0.3 percent.
However, monthly price increases were noted in the following commod­ity classes: cake flour, macaroni, malt, other cereal, footwear for women, par­affin as well as funeral services.

Annual increases were also observed in the following commodity groups; food with 3.1 percent, clothing (2.4 per­cent), electricity, gas and other fuels with a 17.2 percent, goods and services for routine maintenance (3.5 percent), transport services (21.6 percent) and education (13.4 percent).
The rand (to which the Loti is pegged) has seen a major decline since the last quarter of 2013.
It currently stands at just over 11.00 to the dollar compared to R8.9 in Janu­ary 2013.

A weak currency means that goods imported from international markets become more expensive, raising produc­tion costs which translates into more expensive consumer goods for house­holds.
Local economist Arthur Majara said depreciation of the rand not only af­fects importers and consumers in South Africa but also end-consumers in Leso­tho as about 95 percent of the commodi­ties consumed locally are from South Africa.

“Price movements in South Africa affect Basotho consumers as well, be­cause we import about 70 percent of our inflation from them from the goods we consume and inflation targeting is handled by the South African Reserve Bank,” said Majara.

Majara added that depreciation of the rand leads to an increase in the cost of raw materials imported by most South African manufacturers resulting in an increased cost of production and therefore increase in the price consum­ers pay for such goods.

“Local textile and clothing factories are also negatively impacted as their profit margins decline when the cur­rency depreciates,” Majara added.

Consumer inflation in South Africa stood at 5.4 percent in December, up from 5.3 percent in November.

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