This week’s drop in fuel price may bring temporary relief, but consumer debt remains too high so don’t see this as an early Christmas present, experts warn
The drop in the retail price of petrol of 45 cents a litre on Wednesday will bring welcome relief to deeply indebted South Africans but the overall indebtedness of consumers remains a problem, said Neil Roets CEO of Debt Rescue, one of the largest debt counselling companies in South Africa.
“The 60 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 unemployment at around 25% is perilously high and the overall economic outlook remains grim as millions of consumers are unable to service their debt now topping R1,44-trillion (according to Statistics South Africa) resulting in ever greater numbers having to seek help from debt counsellors.”
Roets said while the predicted price reduction was to be welcomed, consumers should not see this as an opportunity to stack up even more debt.
“With Christmas around the corner, some consumers may see this as an early Christmas present. This is not the case because there is a strong likelihood that the rand could fall suddenly because the economic fundamentals remain weak.
“This would immediately impact on the price of imported crude oil and consequently increase the fuel price.
E-tolls remain a problem and many small businesses have become severely distressed or have had to close their doors because of the increase this has caused in their overall operating costs.
“Among the hardest hit are commuters who have to travel between Johannesburg and Pretoria daily to get to work. For most of them this has added significantly to their costs and many have been forced to use the congested Old Johannesburg Road which is wholly inadequate to carry the increased traffic load.”
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 later in the year if the Rand remained at present levels and if the oil price continued to decline.
“Both the rand and the oil price is all over the place which makes long-term predictions difficult,” he said.
“The sharp fall in the oil price with the slight appreciation in the rand has made this drop possible but all this can change overnight.”