Double blow for South Africans hitting next month
South Africans are surviving on debt, with many putting at least half of their incomes towards repayments every month while others are simply not coping – and it’s about to get worse with price hikes for medical aid and electricity coming next month.
The Experian Consumer Default Index (CDIx), which measures the rolling default behaviour of South African consumers with Home Loans, Vehicle Loan, Personal Loan, Credit Card and Retail Loan accounts, has seen a deterioration from 3.97 in Q4 2022 to 4.68 in Q4 2023 – a relative change of 18%.
As of the end of 2023, South African households had close to R2 trillion in outstanding debt, with R25.8 billion in default.
Additionally, Eighty20’s report shows that the overall instalment-to-net-income ratio for all South Africans is 47%.
Debt levels are the highest for the middle class, at 79% of income going to instalments (up by nearly 28% in just over two years), followed by the Heavy Hitters (the wealthiest top 5%) at just over 61%.
Despite this, all South Africans are in for more financial pain as medical aid and electricity rate hikes kick in on 1 April 2024.
Electricity
Starting in April, South African households will witness a significant increase in their monthly electricity bill as residential Homepower rates will increase by about 12.7% across the board.
In December 2023, the High Court of South Africa rejected the requests for a judicial review of the revenue decision and tariff approval made by The National Energy Regulator of South Africa (Nersa) regarding Eskom’s fifth MultiYear Price Determination (MYPD5) application for the 2023/24 and 2024/25 fiscal years.
The judgement followed applications by the Democratic Alliance (DA) and the South African Local Government Association (Salga) to review the Nersa decision on Eskom’s MYPD5 revenue application.
The High Court found that “when all is considered and the detailed and extensive reasons furnished by Nersa is compared with the attacks on its decisions, none of the review grounds pass muster,” the court said.
This means Nersa’s approved 18.65% increase in electricity prices for 2023 and 12.74% hike effective April 2024 will stand.
The two price hikes represent a 33.8% electricity price increase over the past two years.
According to MyBroadband’s calculations – depending on which tariff schedule and usage – households can expect to pay between R168 and R676 more per month on electricity from next month.
Medical aid
Like electricity, medical aid schemes also increased their fees for 2024, starting April 2024.
Last year, the Council for Medical Schemes (CMS) cautioned medical aids in the country to limit their 2024 price hikes to around 8.% (including reasonable utilisation estimates).
This was advised to protect medical scheme members from further financial distress and the likely risk of losing health insurance coverage due to affordability constraints.
Despite this call, South Africa’s biggest medical aids hiked their rates by between 6.9% and 9.6% for 2024.
Those on the higher end of the percentage increase range noted lower contribution increases in the last few years due to the Covid-19 pandemic and economic difficulties experienced by households as the reason for the more significant hikes.
At the same time, they noted inflation has also seen the average cost per claim increase considerably.
However, the CMS noted costs in the private healthcare sector have been rising faster than inflation in recent years, while growth in medical scheme membership has stalled.
In addition to this, South Africa is facing adverse macroeconomic conditions characterised by high interest rates, stubbornly high inflation rates, volatile domestic currency, surging energy prices, and lacklustre economic growth.
“Most household budgets will remain constrained for the foreseeable future, leaving most consumers in a precarious financial position,” the CMS said.
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