The expected increase in the price of petrol and diesel in February is bad news for consumers, says debt management company Debt Rescue, who has noted a big jump in the number of debtors looking for help already in 2017.
The Automobile Association is predicting that the petrol price is set to jump by 44 cents, diesel by 37 cents, and illuminating paraffin by 31 cents, next month.
Caused largely by sharp increases in the price of crude oil, Neil Roets, CEO of Debt Rescue, said that further increases can be expected later this year.
“Deeply indebted South Africans who are already at their wits end because of rising food prices and crippling taxes will be hit hard by this increase because it is going to push up prices across the board and could perhaps even help to further stoke the fires of inflation.”
Roets welcomed Tuesday’s announcement by the Reserve Bank that it was keeping the rate of borrowing (repo rate) steady at 7%. However, he cautioned that interest rates are likely to rise during the course of the year.
“We think that this may be a temporary measure because pushing up the repo rate is one of the few tools the Reserve Bank has at its disposal to curb inflation,” he said.
He said country’s outlook remained dim. “Eskom has served notice that it will ask the energy regulator for a substantial increase when electricity tariffs come up for review,” Roets said.
“Consumers are already up to their necks in debt. With the increase in the Petrol price and the commensurate hike in the prices of almost everything else because of the heavy reliance on road transport, it is going to make for a toxic mix that is going to severely impact the more than half of all South Africans who are three months or more behind in their debt repayments.”
Roets said that since the beginning of January there had been a marked increase in the number of consumers who have sought relief by going under debt review.
“While we always see a spike early in the year because of the debt hangover caused by excessive spending over the Christmas holiday, this year has been exceptional.
“We have seen a double digit jump in the number of debtors approaching debt counsellors for help.”
Roets said that with food inflation running at 11% and the Consumer Price Index (CPI) running at 6.6% – well above government parameters – there is not the slightest possibility of relief in sight for consumers.
“Total consumer debt now stands at close to R1.6-trillion – according to the latest figures released by the reserve bank – which clearly shows that South African consumers have not cut back on spending. A recent World Bank index has also shown that South Africa is one of the most indebted countries in the world.”
New data published by Momentum and the University of South Africa also showed a steady decline in South African households’ net wealth.
The report found that the real value of South Africans households’ net wealth declined by 0.9% over the course of the the third quarter of 2016‚ following a decline of 2.7% in the second quarter.
This also comes after a continuous year-on-year decline which began in 2014.
More concerning is the fact that South African households are still poorer, despite cutting down on debt. Not saving up for retirement or emergencies is also seriously impacting their net wealth.
“The decline in households’ net wealth – which is the value of their assets minus their liabilities – means that an ever growing number of South African households will not have sufficient income at retirement, struggle to maintain current lifestyles and find it increasingly difficult to recover from unexpected shock expenses such as the cost of medical treatment, a car accident, or theft,” the report said.
A recent study by Old Mutual indicated that only about half of South African households would be able to find money to cover R1,000 in unforeseen expenses – while only a quarter could manage R5,000, with the rest turning to debt accrual.