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Crushed by living costs: consumers in the country in 'deep trouble'

A staggering 88 percent of South Africans can no longer afford basic goods and services in the face of ever-rising living costs, the latest survey conducted by Debt Rescue, released this week, found. Picture: Karen Sandison/African News Agency(ANA)

A staggering 88 percent of South Africans can no longer afford basic goods and services in the face of ever-rising living costs, the latest survey conducted by Debt Rescue, released this week, found. Picture: Karen Sandison/African News Agency(ANA)

Published Feb 23, 2022

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A STAGGERING 88 percent of South Africans can no longer afford basic goods and services in the face of ever-rising living costs, the latest survey conducted by Debt Rescue, released this week, found.

This as Finance Minister Enoch Godongwana delivers his Budget today, walking the ever fraught tightrope of guiding South Africa’s growth trajectory, while balancing South Africa’s books amid deteriorating socio-economic conditions with high unemployment, increasing poverty, inequality and households under pressure.

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The combined effects of the pandemic, a weak economy, and rising inflation and interest rates has led to more financial stress for many South Africans.

The survey polled more than 1 300 consumers, which Debt Rescue said showed that “South Africans are being crushed by the volley of living cost increases that just keep hitting them from all sides and can no longer afford even the basic goods and services”.

Approximately 72 percent of people would no longer be able to cover their household electricity needs when the proposed electricity price hike of 20.5 percent kicked in from April, while “an astronomical” 88 percent had to cut sharply on basic goods and services to manage their increased living costs, the data showed.

It also found that 76 percent said they did not have enough money to cover the latest increases in fuel, electricity and interest rates, especially as salaries were not being adjusted in line with inflation.

The data paints a grim picture of consumers in deep, deep trouble, said Neil Roets, the chief executive of Debt Rescue.

“This is happening against the backdrop of rising fuel and food prices as well as a higher interest rate while unemployment is at an all-time high” he said.

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The latest Central Energy Fund data predicts another hike in the price of petrol by R1.24 per litre (95 Octane inland) next month – one of the steepest monthly increases on record.

“It is unacceptable to put people under even more pressure right now, even though we understand the position the SA Reserve Bank is in to help curb CPI (consumer price index) and high inflation,” said Roets.

He said it was distressing to see the impact on families of the rising cost of core staple foods.

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“These are the foods that ensure families do not go hungry and are the basis of nutritious meals. The high cost of these essential foods results in a lot of nutritious food being removed off family plates” he said.

The January 2022 Household Affordability Index report, released by the Pietermaritzburg Economic Justice and Dignity Group, showed an increase of nearly 9 percent in the cost of the basic household food basket, demonstrating that the average cost of a Household Food Basket was R4 401.02 – up from R4 275.94 in December last year. Fifteen of the 17 foods considered core foods, which should reasonably be found in most homes, had increased in price.

“More and more consumers will be purchasing these foods with their credit and store cards every month, and that is the start of a dark downward spiral,” Roets said.

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“Food is the one commodity that should always be bought using cash. If consumers have hit that point, then they are in very serious trouble, especially as they are also paying the high interest rates that these store cards cost to use. It’s a debt disaster but is now often the only option.”

Professor Andre Roux, an economist at the University of Stellenbosch Business School, delivering pre-budget comment, noted that the growth in private consumption expenditure had been largely financed by credit.

“This is reflected in the increase in the ratio of household debt to disposable income from 55 percent in 2001 to almost 90 percent by 2009, and a still high 75 to 80 percent today. The implication is that South Africa’s economic growth path is debt-driven, and therefore not sustainable. In fact, as households attempt to ‘fix’ their balance sheets (through a deceleration in the demand for credit) economic growth will lose momentum.”

Roets cautioned South African consumers that no matter how difficult it became to balance the monthly budget, using debt to service living costs was “a recipe for disaster – it’s like digging a hole that you can never climb out of”.

For those in the financial hole, he advised considering consulting a registered debt counsellor.

The debt review process is a legal remedy that forms part of the National Credit Act, to assist over-indebted consumers. The process allows consumers who are struggling financially, to reduce their monthly debt repayments and extend their repayment terms, while obtaining protection from new legal action, with the help of a professional in the form of a debt counsellor.

Nosiphiwo Nxawe at DebtBusters says research and anecdotal evidence show that being in debt can take its toll on mental well-being. That, in turn, made it harder to face reality and deal with the root cause of the problem.

According to DebtBusters’ fourth quarter Debt Index, debt counselling enquiries in the fourth quarter of last year rose by 18 percent compared to the same period the previous year.

The organisation said the trend intensified in the first month of this year, with enquiries growing by more than 32 percent compared to January last year.

“The positive aspect of this is that more people are seeking help, but there are many consumers who could benefit from debt counselling yet continue to struggle month after month hoping things will get better. A typical comment from people who choose debt counselling is that they wish they’d come to us sooner,” said Nxawe.

Nxawe said people who had taken back control of their finances talked about feeling relief and happiness, having put the anxiety of being over-indebted behind them.

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