The main brake on this economy is administered prices. That’s aside from no economic plan. The picture is bleak. Because of administered prices, households are spending less on items other than electricity, water, rates, and fuel. They have very little money left over after paying these big four, including medical aid. However, medical aid is not an administered price. It has increased for other reasons.
The shocking story that nobody writes about in the press, and no politicians touch on, is that administered prices have become entrenched in the South African economy. We must understand that administered prices were caused by a reckless political party and reckless government. All this began after the regime change in 1994. The corrosion started slowly, then sudden collapse. You all know the story about Eskom, about municipalities, about theft, looting, and plunder.
Now, once upon a time, 30 years ago, electricity was delivered cheaply, as was water, as were rates. You are paying astronomically high costs for electricity, water, and rates to try to fix the broken system. This won’t go away. It is entrenched. It is here to stay.
What makes it all worse is the recent spike in the oil price. Now you might say the oil price here in South Africa is not administered. Well, for anyone who analyzes the figures, they’d fall over backwards with laughter at such naive thinking. The government is raking off billions in various levies from that fuel price. You can see in the last budget they increased the levy.
Now what does this mean? You know, if you take all these small businesses, whether it’s an electrician, a plumber, a landscaper, a hairdresser, a small retailer, and then the professionals—doctors, lawyers, dentists—these people are under pressure because consumers have less to spend on all of these services.
I mean, people are battling so much that the main topic item is cheaper groceries, but it gets far worse because, in a place like the Southern Peninsula, even discount stores are closing. Shoe City closed in the Sun Valley Mall. Foodeez, a food discounter, closed in Fish Hoek Main Road. This is the state of the economy because of administered prices, and unfortunately, I don’t want to be the harbinger of bad news, it can only get far, far worse. Nothing is being done about it.
And the other thing about rates and taxes: not only are you being charged higher rates and taxes because of the high levels of corruption, but because each of these municipalities has to pay for the poor. They have to provide housing, they have to provide electricity, they have to provide water, they have to provide medical services, they have to provide policing. This is a basic human right in this country.
So, that rate bill you get is paying for many others, and that cost of paying for many others flooding into cities, while places like the Eastern Cape, which is obsessed with changing names, flounders and is a shithole. People are leaving the Eastern Cape in hordes because it has collapsed.
Core Administered Prices in South Africa
Administered prices—defined as those set by government agencies or state-owned entities rather than by market forces—constitute the single most significant non-discretionary burden on the South African consumer. While general inflation is managed by the Reserve Bank, these state-driven costs have operated in a vacuum of accountability, consistently outpacing the Consumer Price Index (CPI) for decades.
The primary drivers of this economic “vice grip” include:
- Electricity Tariffs: Controlled by Eskom and NERSA. Since the onset of the energy crisis in 2008, these prices have undergone a “shock” trajectory, frequently rising at triple the rate of inflation to cover debt servicing and systemic inefficiencies.
- Water and Municipal Rates: These are the primary revenue streams for local governments. Rates are increasingly leveraged not just for service maintenance, but to cross-subsidize free basic services for the indigent and to cover the fiscal holes left by municipal mismanagement.
- Regulated Fuel Prices: While the base cost of oil is global, the South African pump price is heavily “administered” through the General Fuel Levy and the Road Accident Fund (RAF) Levy. These taxes act as a massive, invisible revenue stream for the Treasury, effectively turning every liter of petrol into a fiscal collection tool.
- Public Transport and Education: Regulated rail fares and public school fees add a final layer of mandatory cost that prevents lower- and middle-income households from building any form of discretionary savings.
Corrosion begins with 1994 regime change
To understand the scale of the “skyrocket” effect, one must look at the divergence between administered prices and headline inflation since the regime change. While the South African Reserve Bank targets a range of 3% to 6%, administered prices have behaved as follows: Sector Average Annual Increase (Post-2008) Impact vs. CPI Electricity12% – 25% Radical outperformance of inflation; cumulative 500%+ increase. Water8% – 15% Driven by infrastructure decay and municipal debt. Fuel LeviesHigh Growth Levies often increase even when global oil prices dip. Education/Health7% – 10% Consistently erodes middle-class purchasing power. This trend represents a fundamental shift from the pre-1994 era, where South Africa boasted some of the lowest industrial electricity and water costs in the world. Today, the cost of these services has shifted from a competitive advantage to a primary reason for business closure and capital flight.
Deeply Entrenched
The tragedy of the South African economy is that these prices are now structurally “locked in.” They are no longer temporary adjustments; they are entrenched for three specific reasons:
- The Debt Trap: State-Owned Enterprises (SOEs) like Eskom carry massive debt burdens. To prevent total sovereign default, the government must continue to hike tariffs to ensure these entities remain “going concerns” in the eyes of lenders.
- The Social Subsidy Model: As urban migration increases—particularly from collapsed provinces like the Eastern Cape to the Western Cape and Gauteng—the “paying” consumer is asked to carry an ever-increasing number of non-paying citizens. This is a built-in feature of the municipal billing system that cannot be removed without a total overhaul of the social contract.
- Fiscal Dependency: The government is addicted to the fuel levy. With a shrinking tax base, the Treasury cannot afford to deregulate the petrol price, as it would create a multi-billion Rand hole in the national budget.
Zombie economy
The “vice grip” of these prices creates a cost-push inflation cycle that the private sector cannot escape. When a small retailer or a professional—like a dentist or a lawyer—sees their electricity and rates bill double, they are forced to raise their own prices. However, because the consumer is also being squeezed by those same administered costs, demand collapses.
The result is the “dead zone” currently seen in South African retail: even discount stores are failing because the “disposable” income of the average citizen has been entirely swallowed by the state. This is not a market failure; it is a systemic extraction of wealth by an inefficient state apparatus that has rendered the cost of living—and the cost of doing business—unsustainable.
While those who wish to, or have the luxury to, bury their heads in the sand and pretend nothing is wrong, the rot continues. That’s why businesses are failing, people and families are crumbling and being forced onto the streets. This is the way it is in this country
