More South Africans are using their credit cards to make it to the end of the month

South Africans are increasingly using credit to make it to the end of the month as price hikes begin to bite, says Debt Rescue.

“After months of debilitating petrol price increases – culminating in record hikes in March and April on the back of soaring global oil prices – South African motorists are set to see slight relief in May after the rand nosedived in a week of turmoil. Sadly, this may well be a case of too little, too late,” the group said.

The Department of Mineral Resources and Energy announced this week a decrease of 12 cents per litre for 95 Octane petrol and 93 Octane petrol – which will bring down the cost per litre to R21.84 and R21.51 respectively – while diesel will be hiked by 98c (0.05% sulphur) and 92c (0.005% sulphur).

This dashes the hopes of motorists hoping for a substantial drop after months of increases – notwithstanding the government’s temporary reduction of the general fuel levy (GFL) that remains in effect until 31 May 2022, said Debt Rescue chief executive Neil Roets.

“Although the news of any small petrol price reduction is welcome, it is simply too little too late to have any effect whatsoever on the pain consumers continue to endure when purchasing fuel at the pumps,” he said. “Petrol and diesel prices have surged by more than a third over the past year. What we need is a long-term solution.”

Roets warned that the government’s efforts to rescue consumers will not be able to save the vast majority who have been hit with consistent petrol price hikes for over a year and who are now living on credit to get through each month.

“Consumers have been pushed to the verge of the cliff, and bringing down the petrol price by a few cents per litre will not stop them from falling over the edge,” he said.

The increased cost of living 

The reality is that the fuel price hikes are just one of a volley of living cost increases South Africans have been pummelled with over the past few months. Now, a substantial portion of households can no longer afford even essential goods and services, Roets said.

“Our most recent consumer survey shows that 72% of people can no longer cover their household electricity needs, while an astronomical 88% have had to cut sharply on basic goods and services to manage their increased living costs,” he said.

“Putting nutritious food on the table has become a challenge for most South Africans, let alone the hundreds of thousands who go to bed hungry every night.”

Roets pointed to the Household Affordability Index food basket, released by the Pietermaritzburg Economic Justice and Dignity Group (PMBEJD) on 29 April, that shows yet another increase of R92.84 (2.1%), taking the cost of the average food basket from R4,450.09 in March 2022 to R4m542,93 in April 2022.

“This means that, for too many households, yet another one of the staple foods will simply disappear from the grocery list this month, and who knows what fresh horror May will bring to the table.”

Stressed 

A recent report by market research consultancy Eighty20 found that members of the mass credit market in South Africa can be characterised as ‘stressed’ about their level of indebtedness.

The mass credit market accounts for most credit-active South Africans, 82% of whom have retail credit and a fifth of whom have credit cards. Typically, this market has a monthly instalment to net income ratio of over 70% or at least two loans in default.

Tonia Pavlou, deputy chief financial officer of RCS, one of the leading consumer finance companies in South Africa, these statistics are concerning and point to an over-indebted population that has taken considerable strain during the first quarter of the year.

“If you are struggling to decrease the amount of debt you’ve accumulated over the summer months or are concerned with rising prices and rising interest rates, you can focus on making a concerted effort to work closely with your debt cycle. You can do this by avoiding the things that trigger excessive spending,” she said.

“For some people, this may mean temporarily unsubscribing to promotional emailers from your favourite retailers. For others, it could mean putting a stop to shopping mall visits. Cutting out temptation and opportunities to overspend while working on reducing your debt can go a long way towards reaching a longer-term goal of financial fitness.”

Pavlou also advised creating a debt repayment schedule using a basic Excel spreadsheet or a written list of exactly how much is owed to which institutions can relieve some pressure.

“Seeing the figures on paper will give you a full view of the bigger picture and help you plan your debt repayments strategically. Keep a record of all incremental payments you make towards reducing loans or credit accounts, as this will help you track and monitor your progress.

“Seeing the debt reduce helps to feel less overwhelmed and keep motivated to be consistent with regular repayments, no matter how small.”


Read: Triple blow for households in South Africa

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More South Africans are using their credit cards to make it to the end of the month