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SA leaders have lost touch with how ordinary South Africans are battling

South African are battling

Ordinary South Africans are battling

The decision by the South African Reserve Bank to increase the repo rate by 25 basis points is bad news for consumers and is going to add significantly to the debt burden.

Coming on the heels of a 1% VAT increase and rising inflation – especially in the food sector – consumers are going to feel the pain especially with big-ticket items like vehicle finance and bond repayments, said Neil Roets, CEO of debt counselling firm Debt Rescue.

Homeowners can expect to pay around R165 a month extra on a 20-year loan of R1 million and possibly even more depending on how their bondholder adjusts the interest rate.

It is also going to impact on everything from credit card debt to food purchases and very likely on fuel prices once the current glut of crude tapers down as Opec and other oil cartels are looking at reducing output, Roets said.

He said that consumers are once again going to have to pay the price for the mismanagement of the country’s economy.

“Rather than planning for higher growth, the fiscus is once again looking at the increasingly impoverished consumer to bail out the economy.”

While he agreed that it was important to curtail inflation which the repo rate increase will achieve to some limited extent, the harm it is going to do outweighs the positive aspects of the increase.

“Living in their fancy houses and earning multi-million-rand salaries, many of our leaders have lost touch with how ordinary South Africans are battling to make ends meet.

“Working right at the coalface of deeply indebted consumers who are desperately trying to pay off their collective R1.37 trillion debt that in most cases are three months or more in arrears, we see the hardship that high prices and shrinking wages are having on South Africans,” Roets said.

What was deeply disconcerting was the fact that especially youth unemployment was increasing on a monthly basis while GDP growth has once again been downgraded from 0.7% to 0.6% by the Reserve Bank.

“In our daily discussions with consumers who are flocking to us in ever-growing numbers to be placed under debt review, we are detecting a growing sense of despair and helplessness with most of them not seeing even a glimmer of hope on the horizon,” he said.

Another statistic that was deeply disconcerting was the announcement by the National Credit Regulator (NCR) that overall debt levels had skyrocketed. Retailers granted 35.92% more credit in the second quarter of the year, compared to the previous quarter which Roets said was “highly significant of the dilemma in which consumers found themselves”.

“The harsh reality is that we are one of the most indebted countries on earth collectively owing some R1.73-trillion in debt (latest National Credit Regulator stats).

“The overwhelming majority of South Africans are living on the edge of financial disaster and even a little bit of bad news is enough to negatively tip the scales for consumers,” Roets said.

Independent economist Dawie Roodt said the overall picture of the South African economy remained profoundly negative with jobs on the decline and large numbers of consumers spending more than they earn and plunging themselves ever deeper into debt.

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