JOHANNESBURG - The gloomy picture painted by finance minister Malusi Gigaba in his mid-term budget of high unemployment and low growth for the next three years is going to further tighten the noose around the necks of debt-ridden consumers.
Neil Roets, CEO of one of the largest debt counselling firms in South Africa, Debt Rescue, said the minister had offered no plans that could be remotely construed as offering a way out of the economic morass in which the country found itself at the moment.
“Apart from non-specific promises to stimulate investment and grow the economy, we heard nothing that can remotely be construed as offering hope to the millions of unemployed and under-employed South Africans who are fighting a losing battle against their mounting debt burden.”
Roets said the more than half of all South Africans who were three months or more behind in their repayments having collectively notched up some R1,71-trillion in debt would find little solace in the minister’s utterances.
“While we all knew that there was a large hole in the minister’s budget, most of us hoped that it would be at the lower estimate of R30-billion to R40-billion rather than the R50.8-billion which it turned out to be,
“Although he kept the bad news of tax increases and a likely imposition of VAT on fuel for the main budget in February, it is glaringly obvious that consumers and the corporate world is going to have to pay up the money to plug the hole in the minister’s budget,” Roets said.
While sale of a limited number of Telkom shares will help somewhat in providing ready cash for the treasury, ultimately it was the tax payers of South Africa who were going to have to foot the bill for the government’s lack of fiscal discipline and its rampantly corrupt state owned enterprises, Roets said.
“Simple arithmetic will show that the more individuals and business have to pay in tax, the less money there is for investment and growth and the harder consumers are going to find it to reduce their massive outstanding debts.”
There remained a myriad of problems on the horizon that were going to increasingly impact on consumers leading to ever higher debt-to-income ratios and more bad debt overall, Roets said.
“The fact that the World Bank has cut the country’s growth forecast to 0.6% - 0.1% lower than the minister – is significant. It shows the lack of confidence in the country’s leadership and in its ability to steer the economy to a prosperous future,” Roets said.
He said more people were being forced into debt because they simply could not make ends meet.
“The best advice I can give to my fellow South Africans is to try and live within their means. Avoid store cards and credit cards wherever possible. Personal loans are always a bad option because most of the short-term lenders cover their risk of granting unsecured loans by charging very high interest rates.
- BUSINESS REPORT ONLINE