Two of South Africa’s top economist are predicting that the rand may slide as low as R11.60 or weaker to the dollar in the near future which is going to have a severe impact on everything from the price of food to imported vehicles.
Independent economists Dawie Roodt and Brenthurst Wealth Management investment strategist Mike Schüssler both predict that consumers are in for hard times with middle and lower income groups expected to suffer the most.
Schüssler and Roodt expect further downgrades from ratings agencies Standard & Poor’s and Fitch Group which will almost certainly force the Reserve Bank to increase interest rates which will further negatively impact on consumers.
Schüssler predicts a whopping fuel increase of around 20 cents a litre next month with virtually all commodities including essentials like food increasing substantially.
“This country is facing a perfect storm and there seems to be absolutely no will by the government to do anything about it. They have reached the point where they can’t even guarantee loans for parastatals like Eskom because the fiscus is broke,” Schüssler said.
Roodt predicted that there would be an increase in VAT in the near term and that other forms of taxation like capital gains tax will be expanded.
Neil Roets, CEO of one of South Africa’s largest debt management firms in South Africa, Debt Rescue, said the present situation would have “dire consequences” for consumers who already owe more than R1, 44-trillion in accumulated debt.
“We are going to see a substantial rise in bankruptcies of consumers who have simply reached the end of their tether with an exponential growth in stressed debtors seeking relief by going under debt review.”
Roets said his company was experiencing double digit growth because almost twice the normal number of clients were seeking help from debt counsellors.
“The massive increase of all commodities being predicted by economists is going to have a major impact on the disposable income of hard-pressed consumers,” Roets said.
Quoting the National Credit Regulator, Roets said there are 9.76-million consumers with impaired records — that is, accounts not paid for three months or more.
“There has also been a significant growth in the number of consumers who are having their salaries docked by garnishee orders and who are being blacklisted because of judgements against them.”
He said rising food and fuel costs and slow economic growth are making it difficult for many South Africans to pay back their loans on time
One in every four South Africans is unemployed and the number of borrowers with impaired credit records – three or more payments in arrears – have risen to nearly 50 percent.