The price increase in all grades of petrol by 47 cents per litre on Wednesday on top of the increase in electricity tariffs and an almost certain rate hike by the Reserve Bank later in the year is going to have a devastating impact on consumers.
Debt expert Neil Roets, CEO of Debt Rescue, one of the largest debt management companies in South Africa, said the present combination of economic factors was going to severely impact on consumers, many of whom were already deeply indebted.
“Every single commodity consumed in this country is transported by road and the 49 cents a litre increase in the diesel price is going to impact directly on the prices of essential commodities like food which in turn is going to hit the poorest of the poor the hardest.”
Independent economist Dawie Roodt said consumers should prepare themselves for tough times ahead.
“We are in a catch 22 situation now where the consumer, who in the past was the main driver of economic growth, is now being placed in a situation by the price hikes where they will no longer be able to spend the funds needed to boost growth.
“This in turn is going to impact on unemployment because without substantial growth, unemployment is simply going to keep rising driving more consumers ever deeper into debt.”
Roets said South Africans were already struggling to make ends meet and the latest fuel price increase is going to severely impact on their ability to service their debt load.
“The overall debt that consumers have stacked up during the past several years effectively means that they owe 75% of their net earnings to creditors already,” Roets said.
“Once they have serviced their mostly overdue debt, very little money is left for essentials like food, clothing, transport and school fees.”
“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 counselling remains the best way for consumers to get out of debt in a manageable way paying off their debt in smaller instalments over a longer period of time,” Roets said.
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.