The predicted decline in the South African fuel price of 49 cents per litre, and the even more substantial decrease in the price of diesel of 70 cents per litre, will substantially benefit deeply indebted consumers.
This decrease, however, may be of a very temporary nature as the South African rand is taking a hammering, having decreased in value against the dollar by more than 10 per cent since the beginning of the year. This past week alone it has dropped by more than 1,5 per cent.
Neil Roets, CEO of one of the largest debt management companies in South Africa, Debt Rescue, said while he welcomed the fuel price decrease, consumers should be mindful that other economic indicators remained largely negative and should understand that this was not a windfall that should encourage going on a spending spree.
“It is belt tightening time for the storm that might hit us later this year, as there is almost certainly going to be another interest rate hike. It is also a given that if the rand keeps trading at its current level we are going to be looking at a substantial fuel price increase next month.” predicts Roets.
Roets continues to say that the really good news was the predicted 70 cents per litre decrease in the price of diesel. “Everything we consume is transported by trucks that guzzle vast amounts of diesel. If retailers play the game and pass on the reduced transportation costs we could be looking at a reduction in the price of food and most other goods.
“It might even throw a lifeline to Eskom, who use large amounts of diesel to keep their gas turbine generators going to help fill the shortfall of electricity in the grid.
“Somemajor issues affecting deeply indebted consumers remain, such as the fact that consumers collectively now owe around R1,6 trillion rand and the fact that more than half of all borrowers are now three months or more in arrears with the payment of their bills.
“The total debt that consumers stacked up during the past several years when unsecured credit was easy to obtain remains a major burden for many. This would be a good time to repay as much of this credit as possible rather than going on a spending spree.
“Currently about 75 per cent of the nett income of consumers has to be paid over to creditors which leaves very little disposable income for families to live on.”