The fuel price increase which became effective today will have dire consequences for deeply indebted consumers and may push many desperate people into the hands of loan sharks and micro lenders, say experts.
The price of 95 octane petrol increased by 10c/litre at the coast and by 12c/litre inland.
The CEO of debt counselling firm Debt Rescue, Neil Roets, warned that the increase in the price of fuel as well as the across-the-board increases of goods and services is going to push many deeply indebted consumers into the hands of loan sharks and micro lenders.
Roets said many consumers had reached the point where their credit records were so impaired no legitimate micro lenders would take them on.
“Their only option is to seek out loans at extortionate rates from illegal loan sharks who are still widespread, especially in rural areas.
“The other consequence is going to be that it is going to push many thousands of consumers into debt counselling to try to avoid bankruptcy or getting judgements against them and having their salaries docked by garnishee orders.”
He said a lot of consumers were on a knife edge and the series of the fuel price increase is going to be the straw that breaks the camel’s back when the additional price rises in food and consumer goods.
“This is going to filter through the economy and will exacerbate the situation even further.
“It is a fact that almost half of all credit-active consumers in South Africa have impaired credit records. In other words, about nine million consumers are in arrears by three or more months on at least one account, or have a debt judgment or administration order to their names,” Roets said.
According to Statistics South Africa, in December, the total outstanding consumer credit balances (or gross debtors’ book) stood at R1.44 trillion, representing a 3.76% and a year-on-year growth of 11.33%.
“We are going to see this figure spiralling with even well-heeled consumers joining the ranks of the financially distressed middle-class and lower-middle class.
“Poor people, who are living on or below the breadline, are going to be hardest hit with even the most basic foodstuffs out of their reach,” Roets said.
Isaac Thulwa, an independent consumer consultant, said the wage increases of above the inflation rate would be of little help as they would be engulfed by continuing increases in administered prices.
“We have close to 15 million South Africans who are depending on the government’s social security grants, and they will be hardest hit,” he said.