Petrol price could drop by up to 25c/l

Cape Town – The projected decrease in the price of petrol of between 19 and 25 cents a litre predicted by economist Dawie Roodt should not serve as an incentive for consumers to go out and spend money they don’t have.

Roodt said depending on the price of crude oil and the Rand US Dollar exchange rate, the price of petrol could drop by as much as 25c a litre on Friday with a further decrease of about 13c a litre predicted for October. The diesel price is expected to remain unchanged

Last week Reserve Bank Governor Gill Marcus said petrol prices increased at a year-on-year rate of 23% in August, but that favourable base effects and the small decline in the price in September are likely to result in a far lower rate of petrol price inflation in that month.

The combination of a lower oil price and a stronger exchange rate is likely to result in a further moderate price decline in October, reversing the expectation earlier in the month of a further significant increase, she said.

The rand was slightly firmer against the dollar on Wednesday but economic data from the United States in the coming days could push it weaker if the numbers come through stronger than expected.

The rand was at R9.8520/$ at 08:37, up 0.2% from its New York close on Tuesday.

While Roodt’s predicted petrol price reduction was to be welcomed, consumers should not see this as an opportunity to stack up even more debt, warned Neil Roets, CEO of Debt Rescue.

“What we hope for is that the retail sector takes cognisance of this reduction and that it will be reflected in lower prices for all goods and services once the price decrease has worked its way through the system.”

The serious nature of South Africa’s consumer debt was clearly demonstrated by the latest TransUnion consumer credit index which found that consumer loan defaults continued to rise. It also found that “distressed borrowing” had held steady, but credit card usage nonetheless remained high, and household cash flow was deteriorating.

It further found that the demand cycle for unsecured lending was “extremely robust.”

The number of civil summonses for debt – which is the first legal step in the recovery of debt – jumped by 5.6% year on year in July to 78,908, after declining year on year to 65 729 in June.

Roets said the high costs of food and services as well as slow economic growth is making it difficult for many South Africans to pay back their loans on time. One in every four South Africans is unemployed and the number of borrowers with impaired credit records – three or more payments in arrears – has risen to nearly 50%.

Roets said total consumer debt is now topping R1.44 trillion according to Statistics South Africa.

“We are already seeing a dramatic growth in the number of people who are seeking protection from their creditors by going under debt review. There has also been a significant growth in the number of consumers who are having their salaries docked by garnishee orders and who are being blacklisted because of judgements against them.

“We are experiencing double digit growth in our own client list and we know from colleagues in the debt counselling industry that they too are seeing rapid growth in the number of distressed consumers seeking help,” Roets said.

He said the number of consumers seeking help from his company had more than doubled over the past six months.

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