Looming services price increases

MANY already overindebted consumers could fall even deeper into debt due to looming interest rate hikes and increases in the prices of petrol and electricity tariffs, debt management company Debt Rescue CEO Neil Roets said on Tuesday.

Extremely high levels of debt limit the extent of growth in consumer spending.

The petrol price will increase by 47c/litre on Wednesday, while electricity tariffs will rise further next month by an additional amount yet to be determined by the energy regulator. Interest rates are also expected to rise before the end of the year.

“The 49c 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,” Mr Roets said.

The significant price hikes in fuel and electricity would place consumers in a situation where they would no longer be able to spend the funds needed to boost growth, according to independent economist Dawie Roodt.

“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,” Mr Roodt said.

Unemployment rose to 26% in the first quarter from 24% in the previous quarter.

The ratio of debt to disposable income stood at 77.6% in the fourth quarter of last year, indicating that households had too much debt for the kinds of incomes they had.

“Once they (consumers) have serviced their mostly overdue debt, very little money is left for essentials like food, clothing, transport and school fees,” Mr Roets said.

The National Credit Regulator’s consumer credit market report showed that the total outstanding gross debtors book was sitting at R1.47-trillion, representing money owed by consumers in the form of mortgages, vehicle finance, credit cards, store cards, personal loans, short-term loans, pensions and insurance-backed loans.

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