The Department of Energy is expected to announce a decline in the petrol price of 70 cents a litre on Friday.
The predicted decline in the fuel price, along with a decrease in the price of diesel of around 50 cents a litre, will substantially benefit deeply indebted consumers, said debt management company, Debt Rescue.
This decrease, however, may be of a very temporary nature as the rand continues to slide against major currencies, having briefly weakened to an all-time low of R14 to the dollar earlier this week.
Neil Roets, CEO of Debt Rescue, said while he welcomed the fuel price decrease, consumers should be mindful that other economic indicators remain largely negative.
“It is belt tightening time for the storm that might hit us later this year, as economic growth is going to be way lower than predicted by the government.”
The current drought that was being experienced by farmers in large parts of the country would almost certainly push up the price of food, Roets said.
“Some major 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 debt as possible rather than going on a spending spree.”
“Currently about 75% of the net income of consumers has to be paid over to creditors which leaves very little disposable income for families to live on.”
Independent economist Dawie Roodt said the petrol price decrease could have been as much as one rand had the currency not taken a nosedive against the US dollar.
“It is highly unlikely that we will see a further fuel price decrease next month if the Rand remains at current levels.”
He said major concerns were South Africa’s mounting debt and the global contraction fuelled by the slowdown in the Chinese economy.
“The outlook for consumers in South Africa is grim because of several factors including the massive slowdown in the manufacturing sector which is now officially in recession as well as the threat of major strike action in the gold and platinum sector.”
He said consumers should do everything within their power to decrease debt as far as possible and avoid stacking up new debt.
“We are facing a very uncertain future and South Africans need to be mindful of this and prepare to tighten their belts for the tempest that is coming our way.” Roodt said.
He predicted that the economy would grow at less than the 1.2% being predicted at the moment.
“The best case scenario would be a growth rate of 1% while the worst scenario would be a full-blown recession.” Roodt said.