CAPE TOWN – South Africa will have to immediately cut is nominal GDP estimated at R1.145bn plus by 8% it wants to stop the skyrocketing interest it pays to local and international lenders failing which the interest it pays on these loans will just continue to skyrocket.

Independent economist Dawie Roodt said if the finance minister wanted to reduce the cost of borrowing as he claimed in his mid-term budget speech, the only way that could be achieved was first of all to stop all fraudulent and wasteful expenditure and secondly to radically reduce the size of the bloated state workforce.

“For every month the finance minister waits to implement austerity measures the amount by which the state will have to cut its budget will just keep increasing to the point where it will simply not be doable,” Roodt said.

He added that it was doubtful whether there was the political will or whether South Africa’s newly elected president Cyril Rampahosa had the political capital to even address the issue prior to next year’s election.

Neil Roets, CEO of one of South Africa’s largest debt counselling firms and an expert in consumer debt, agreed with Roodt saying that the only way South Africa’s deeply indebted consumers will ever see the light again was if government got its house in order.

“We have never seen the likes of the number of over-indebted consumers seeking help from debt counsellors as we are seeing now.

“Over the last six months alone we have shown a spike of around 20% of new clients knocking on our doors..

“This was exactly the experience of Pick n Pay who reported that consumers had taken up R200-million of the R1-billion the supermarket giant had made available to its store card credit facility,” Roets said.

“The harsh reality is that people now have to make use of credit to feed themselves and their families,” he said.

About the only good news coming out of the economy today is the fact that the latest calculation shows that fuel is unlikely to rise next month – depending on how the rand exchange rate and the crude oil price performs, Roodt said.

“At most we are probably looking at an increase of around 3-5 cents a litre but the most likely scenario is that the price will remain constant.

December is another story altogether with the United States continuing to threaten that it plans to cut off Iranian oil exports and oil markets fluctuating world-wide, Roodt said.

Roets said it was highly likely that the local currency would weaken further against the US Dollar and that the price of crude was going to spike.

“The northern hemisphere is entering autumn which is when consumers fill up their heating oil tanks causing demand to spike. This, coupled to pending oil sanctions against Iran, is going to increase demand causing prices to increase.”