Rate hike will hit poor and middle class

The interest rate increase announced by Reserve Bank Governor Gill Marcus yesterday is going to negatively impact on poor and middle class consumers because it will increase prices of goods and services across the board.

This is according to Neil Roets, CEO of debt management firm Debt Rescue. Roets said the increase in the repo rate by 50 basis points could make many South Africans feel the pinch.

“As we have seen many times in the past, the retail sector will be quick to jump on the bandwagon and we can expect increases in the prices of most goods and services within a matter of days.”

He said that “as always” the poorest of the poor would bear the brunt of the increases because so much of their disposable money is spent on food.

“Coming hot on the heels of the increase in the fuel price and e-tolling, consumers are definitely going to feel the pain of this rate increase,” Roets said.

Dawie Roodt, an independent economist with Efficient Group, said while the increase would negatively impact on price increases, it would help stabilise the rand. He expected the rand/US dollar exchange rate to stabilise at around R10.50. This could prevent another round of massive increases in the fuel price and would help to balance the government’s books.

Business Unity SA said the rise in interest rates would inevitably reduce growth and job creation.

Lew Geffen, chairman of Lew Geffen Sotheby’s International Realty, said the interest rate hike was unlikely to have an immediate effect on the residential property market, which is currently in a slow boom period.

“It does signal a warning to buyers, though, not to purchase property at the upper limit of what they can afford because interest rates are unlikely to remain this low in the medium term.

“As long as they can anticipate a total of a 3% rate increase over the next few years and can sustain the affordability, they will be OK.”

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