The damage done to the economy by nine years of Jacob Zuma’s presidency was so severe that even his decision to resign with immediate effect is unlikely to reverse the decision by rating agencies to further downgrade South Africa’s credit rating.
Independent economist Dawie Roodt said there was a strong possibility that Moody’s and Fitch would announce further downgrades later in the year opening the door to higher interestrates further tightening the noose around the collective neck of consumers.
Neil Roets, CEO of Debt Rescue, one of the largest debt counselling companies in the country, said the next hammer blow to strike consumers will be finance minister Malusi Gigaba’s budget speech on February 21 during which he is expected to announce radical steps to plug the government’sR50-billion-plus budget hole through increased taxes and possibly even a higher VAT rate.
There is no doubt that although there is a sense of elation that we may be seeing the beginning of the end of state capture and widespread corruption, we are none the less in for a very rough ride before we will start picking the fruits of Cyril Ramaphosa’spresidency,” Roets said.
He said the fact that there had been a marginal decrease in the unemployment rate recently, the real figure of workers who were sitting idle at home and the many who had given up looking for jobs remained disturbingly high. “We at Debt Rescue are experiencing our highest growth rate ever of folks seeking relief from their crushing debt by being placed under legal debt review.
This is the direct result of more consumers who are unable to pay their outstanding debt and who choose to go under debt review.
There has been a disturbing increase in the outstanding amounts of debt that consumers have ratcheted up that they now have to deal with. “Debt counseling and the follow-up process of being placed under debt review has for a growing number of South Africans become the last remaining option of hanging on to their meager belongings while they repay their debt in smaller amounts over a longer period of time,” Roets said.
He saidthatwhile he fully expectedthe economicsituationto improveover time, consumerswouldhavetoexercisepatience.
“The damage done to every aspect of the economy by Jacob Zuma and his cohorts has been so severe and so deep-rooted that it is going to take years rather than months to reverse.
“It will not be before we see the guilty put in jail and those in government and in state-owned enterprise fired for misconduct that the economy will begin to recover. “There is no doubt that there are massive amounts of investment capital parked overseas waiting to be brought to this country to be invested in multiple sectors of the economy. This, however, is not going to happen before situation has been turned around and that investors are satisfied that South Africa has once again become a safe investment haven.
More than half of all South Africans are three months or more behind in their debt repayments, collectively owing some R1.73-trillion in debt (latest National Credit Regulator stats).
“There is growing evidence of tax avoidance and even illegal tax evasion and this is something the state can not afford.
There is also a likelihood of growing dissatisfaction with the government’s lack of service delivery which will through violence and protest action.
The harsh reality is that in order to get the country out of the hole in which it finds itself thanks to the massive maladministration of the Zuma government, we are all going to have to pull together and do our best to grow the economy based on sound economic principles of hard work and prudent investments,” Roets said.
RoetssaidmostSouthAfrican consumers had reached the point where they would simply have to face the fact that they could not maintain their lifestyle as they did in the past. “It has now become a matter of survival. Opening more accounts and acquiring more store cards and credit cards is absolutely not the answer.
South consistently notched up the unenviable African consumers have a reputation as having one of the highest debt ratios as a percentage of GDP among emerging market economies,” Roets said.