Consumers in for price shocks in new year
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 could be in for a rough ride.
Neil Roets‚ chief executive of Debt Rescue‚ one of the largest debt-counselling companies in South Africa‚ said: “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.”
January was the month of the great reckoning, he said.
“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 have been stacked up during the holiday season.
“Parents suddenly realise that they have to pay school fees that have 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‚” he advised.
Despite the temptation to keep spending between now and the new year festivities‚ Roets warned that next year was going to be a tough year and that consumers who had difficulty making ends meet this year were going to find it much harder in the new year.
With unemployment now at 27.7%‚ key job sectors, including mining and the industrial sector, were expected to continue shedding jobs‚ he said.
And this in a country which already had a problem with debt.
“Total consumer debt now stands at close to R1.71-trillion (according to figures released by the Reserve Bank), which clearly shows 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.