The drop in the retail price of petrol of 69 cents a litre will bring only temporary relief to consumers who jointly owe close to R1.5-trillion rand to credit providers.
Neil Roets CEO of Debt Rescue, one of the largest debt counselling companies in South Africa said although the price reduction is good news, consumers should rather look at reducing their debt load instead of going on a spending spree this holiday season.
“The 53 cents a litre reduction in the diesel price is actually more significant because most goods in the country are delivered by road transportation and if retailers play fair, this could result in slightly lower food prices.
“The fact remains that the overall economic outlook remains grim as millions of consumers are unable to service their debt resulting in ever greater numbers having to seek help from debt counsellors.
“Debt Rescue has been growing at a phenomenal rate because of the fact that so many consumers are on the verge of losing their possessions to debt collectors and resort to debt review to help them repay their debt in a manageable way,” Roets said.
He said with Christmas around the corner, some consumers may see the extra cash in their pockets as an early Christmas present.
“This is not the case because there is a strong likelihood that the rand could fall suddenly because the economy remains weak.
“This would immediately impact on the price of imported crude oil and consequently lead to an increase in the fuel price.”
According to the National Credit Regulator’s Consumer Credit Market Report (CCMR), the total outstanding gross debtor’s book is sitting at R1.47 trillion. This represents money owed by consumers in the form of mortgages, vehicle finance, credit cards, store cards, personal loans, short term loans, pension and insurance-backed loans.
Dawie Roodt, chief economist at Efficient Group said further decreases could be expected next year because of the downward slide in the crude oil price provided the Rand remained steady.
“The United States now produces almost as much oil as the entire Middle East and oil and gas production from shale exploration is growing at a steady rate. We must however be mindful that our currency is vulnerable and could drop significantly in the new year.”
South African Savings Institute chairwoman Prem Govender said despite the significant decrease in the fuel price, consumers should still be cautious when spending.
“Consumers need to understand that they can only come to grips with their dismal financial situation if they take a long, hard look at their spending habits and take wise decisions about how they handle money.”