SA consumers are in for a rough ride in 2018

With major price increases for food and other essential commodities on the cards as well as a continued sluggish growth rate predicted for the new year, South Africans are in for a rough ride in 2018.

With unemployment now at 27.7%, key jobs sectors including mining and the industrial sector are expected to continue shedding jobs at unprecedented rates.

With the election of Cyril Ramaphosa as the next president of the ANC and the implications it holds for greater political and economic stability as well as the likelihood that he may become the next president of the republic, there is a greater possibility of at least some foreign direct investment coming into the country next year.

Highly respected SA Reserve Bank governor Lesetja Kganyago recently made the point that although the country’s unemployment rate was already among the highest in the world at 25% (currently at 27,7%). It was expected to further deteriorate in 2018.

The only other comparable countries to have such high rates, according to data by the International Monetary Fund, are Spain and Greece.

Neil Roets, CEO of Debt Rescue, one of the largest debt counselling companies in South Africa, said their statistical analysis of the debt situation in South Africa showed that consumers would notch up record levels of debt in the new year.

“It seems sad that we have to be so pessimistic at such a happy time of the year but the sooner consumers realise that the economy is in trouble and tighten their belts, the fewer of them will have to come to us to bail them out by placing them under debt review,” Roets said.

Many South Africans who barely make ends meet during the year have plunged themselves ever deeper into debt over the holiday season by spending money on expensive holidays and generally having a good time – often on credit cards or with money borrowed from money lenders at exorbitant interest rates, Roets said.

He said experience over time had shown that January was the month of the Great Reckoning when these chickens came home to roost.

“We see more new clients seeking help with the repayment of their outstanding debt in January and February than during any other month of the year because of additional debts that had been stacked up during the holiday season.

“Parents suddenly realise that they have to pay school fees that had not been budgeted for and with credit cards maxed out on luxuries in November and December many have no choice other than to seek relief by going under debt review to prevent debt collectors from seizing their property.”

It was hugely important to budget, especially for expenses such as school fees and payments on credit and store cards.

“Bear in mind that the interest rate on credit cards is substantial so wherever possible buy cash.”

Roets warned that 2018 was going to be a tough year and that consumers who had difficulty making ends meet in 2017 were going to find it much harder in the new year.

“Total consumer debt now stands at close to R1,71-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.”

He said almost half of all consumers were three months or more behind in their payments. The major culprits are credit and store cards followed closely by unsecured debt.

The only measure of relief for consumers who are in over their heads is the legally-binding system of debt review which allows deeply indebted consumers to repay their debts over a longer period of time in smaller instalments often at a discount.

“Lenders are sometimes willing to take a cut if it means they can avoid having to involve debt collectors or foreclosing on the fixed properties of debtors.” Roets said.

Read: Why investors are still looking at the rand

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SA consumers are in for a rough ride in 2018