Don’t cash out this season

SA warned not to blow bonuses, 13th cheques when cancelling debt should be the priority

BERNARD SATHEKGE

WHILE economic activity has been lacklustre and unemployment remains high. South African consumers seem to be preparing for another festive season spending spree which reflects an attitude described by analysts as “disturbing and irresponsible”.
According to Deloitte’s Year-End Holiday Survey 2014, consumers plan to spend 43% of their Christmas expenditure on gifts which could push many households deeper into debt and create financial difficulties in January.
However, the survey also found that South Africans will cut back on travel and socialising over the festive season in favour of buying food amid tough economic conditions.
Neil Roets, CEO of debt management firm Debt Rescue, said all indications were that consumers were going on a spending spree this holiday season.
“This is bad news for the majority of consumers who already owe more than 75% of their monthly pay checks to creditors.
“Overspending on items like toys, liquor and unnecessary luxuries is sim¬ply going to plunge them deeper into debt,” Roets said.
According to the Acentric Christmas Shopping Intentions Survey 2014, rep¬resentative of middle and upper income South Africans, suggests consumers are preparing for a spending spree.
About 34%> of survey respondents said they were planning to spend more this year than they did last year.
In terms of the types of items that shoppers are planning to buy, food leads the way with 55% intending to purchase Christmas related foods, fol¬lowed by 48% for toys and mainstream clothing and accessories at 41%.
“Many South Africans are seriously chuffed by the reduction in the fuel price but what they don’t realise is that we are only back at the same level that we were this time last year.
“In the meantime the cost of electric¬ity has risen considerably as did the prices of food and clothing. For 43% of consumers to say that they plan on spending more than last year on gifts is a sign of the reckless attitude of many South Africans,” cautioned Roets.
Inst ead of splurging on luxury goods with Christmas bonuses and 13th cheques, deeply indebted consumers should rather look at reducing their debt load.
“While the reduction in the fuel price will bring some welcome relief to especially hard-pressed motorists and hopefully result in small reductions in the prices of essentials like food, but the overall outlook remains grim.
“Millions of consumers are unable to service their debt, resulting in ever greater numbers having to seek help from debt counsellors,” he said.
According to Roets, they are seeing substantial increases in the number of consumers on the brink of bankruptcy applying for debt review because they are on the verge of losing their posses¬sions to debt collectors.
Roets said it was essential that con¬sumers remained mindful of the fact that economic growth is lower than it has been for many years and that the prospects for any improvement next year were slim.

According to the latest National Credit Regulator’s Consumer Credit Market Report (CCMR). the total out¬standing gross debtor’s book is sitting at R1.47 trillion. This represents money owed by consumers in the form of mort-gages, vehicle finance, credit cards, store cards, personal loans and short term loans. The number of consumers with impaired records increased by 105000 during the third quarter to 10.05 million, from 9.95 million in the previous quarter.
Leading economist Dawie Roodt said the upbeat sentiment experienced by many consumers following the decrease in the fuel price was unjusti¬fied because the economy remained weak with little chance of any real growth next year

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