Tax hikes, interest rate hikes, and accelerated inflation are making South Africans pessimistic and leading to economic hardship, survey data from Wits shows.<\/p>\n
Finance minister Pravin Gordhan is expected to announce severe austerity measures with the aim of avoiding a credit rating downgrade to junk status (lower than investment grade), during the national budget speech on Wednesday, 24 February, 2016,<\/p>\n
Professor Jannie Rossouw, head of Wits\u2019 School for Economic and Business Science, says that ratings agency Standard & Poor\u2019s may downgrade South Africa to sub-investment grade, should government not indicate that it is taking steps to boost economic growth.<\/p>\n
Rossouw said that, as the economy will experience no or at best very low growth this year, it will be necessary to do the following three things:<\/p>\n
\u201cAn increased tax burden plus increased interest rates, owing to expected higher inflation, will place consumers under pressure. It is therefore not a good time for consumers to take on additional debt and commitments at this point in time; they should rather make sure that they can afford what they have already committed to with lower disposable income (after-tax income),\u201d he said.<\/p>\n
Wits recently published its South African Inflation Survey among 4,000 Professional Provident Society (PPS) members, to gauge the perceptions around inflation in South Africa.<\/p>\n
The vast majority of respondents felt that actual price increases are actually higher than the official rate of inflation – and more than 90% said they expected even higher inflation in the future.<\/p>\n
According to Rossouw, the survey data shows not only a pessimistic outlook for the future, but also a lack of confidence in historic inflation data as a fair reflection of price increases.<\/p>\n
The overall sentiment is that tax increases and interest rate hikes are putting South Africans on the path of hardship – and that things are just going to get worse.<\/p>\n
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