Fuel price drop? Don’t get too excited

The projected decrease in the price of petrol of between 19 and 25 cents a litre predicted by economist Dawie Roodt should not serve as an incentive for consumers to go out and spend money they don’t have.

Roodt said depending on the price of crude oil and the Rand US Dollar exchange rate, the price of petrol could drop by as much as 25 cents a litre on Friday with a further decrease of about 13 cents a litre predicted for October. The diesel price is expected to remain unchanged.

Neil Roets, CEO of one of South Africa’s largest debt counselling firms, Debt Rescue, said while the predicted price reduction was to be welcomed, consumers should not see this as an opportunity to stack up even more debt.

“What we hope for is that the retail sector takes cognisance of this reduction and that it will be reflected in lower prices for all goods and services once the price decrease has worked its way through the system.”

The serious nature of South Africa’s consumer debt was clearly demonstrated by the latest TransUnion consumer credit index which found that consumer loan defaults continued to rise. It also found that “distressed borrowing” had held steady, but credit card usage nonetheless remained high, and household cash flow was deteriorating.

It further found that the demand cycle for unsecured lending was “extremely robust.”

The number of civil summonses for debt – which is the first legal step in the recovery of debt – jumped by 5.6% year on year in July to 78,908, after declining year on year to 65,729 in June.

Roets said the high costs of food and services as well as slow economic growth is making it difficult for many South Africans to pay back their loans on time. One in every four South Africans is unemployed and the number of borrowers with impaired credit records – three or more payments in arrears – has risen to nearly 50 percent.

Roets said total consumer debt is now topping R1, 44-trillion (according to Statistics South Africa).

“We are already seeing a dramatic growth in the number of people who are seeking protection from their creditors by going under debt review. There has also been a significant growth in the number of consumers who are having their salaries docked by garnishee orders and who are being blacklisted because of judgements against them.

“We are experiencing double digit growth in our own client list and we know from colleagues in the debt counselling industry that they too are seeing rapid growth in the number of distressed consumers seeking help,” Roets said.

He said the number of consumers seeking help from his company had more than doubled over the past six months.

Roets, who is also a lawyer and an accredited solicitor in the United Kingdom, said the situation has become dire and was confirmed as such in a statement from the National Credit Regulator.

More on the fuel price

Get ready for big fuel price hike: report

Do South Africans overpay for petrol?

Rand bites as petrol set for steep rise

Petrol price drop coming

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Fuel price drop? Don’t get too excited