Cape Town - Consumers are in for a rough ride in 2018 and are warned to tighten their belts even further.
Neil Roets, chief executive of Debt Rescue, said many South Africans who barely made ends meet during the year have plunged themselves ever deeper into debt over the holiday season.
“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 are in for a rough ride in 2018. Unemployment is now at 27.7%, and key jobs sectors, including mining and the industrial sector, are expected to continue shedding jobs at unprecedented rates,” he said.
However, Roets said that the election of Cyril Ramaphosa as ANC president holds prospects for greater political and economic stability.
“There is a likelihood he may become the next president; there is a greater possibility of at least some foreign direct investment coming into the country next year,” he said.
South African Reserve Bank governor Lesetja Kganyago recently made the point that although the country’s unemployment rate was already among the highest in the world at 25% (currently at 27.7%), it was expected to deteriorate further in 2018.
The only other comparable countries to have such high rates, according to data by the International Monetary Fund, are Spain and Greece, Roets said.
“It seems sad that we have to be so pessimistic at such a happy time of the year but the sooner consumers realise 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,” Roets said.
“Total consumer debt now stands at close to R1.71 trillion (according to the latest figures released by the Reserve Bank), which clearly shows that 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.”
Economist Dawie Roodt said the prospects for 2018 look bleak but there is the strong possibility of a stronger rand and lower interest rates.
“This will bring consumers some relief with their current credit agreements (especially vehicle and home loans). One should be careful of expecting massive growth, though. The country’s economy is badly bruised and the downgrades also play a role. It will take at least three or four years for the country’s economy to grow by, say, 3%. The damage done and the scale of corruption that shook this country was massive and it will take some time to recover. But there are signs of improvement,” he said.
Chief economist at Economists.co.za Mike Schussler said political fights in the ruling party would affect the economy.
“With Ramaphosa there, we could see some positive signs. But the fights should stop and policy direction needs to be made clear. Our economy has suffered a huge blow, but it is resilient. However, for our economy to grow, we need to increase investor confidence and fix our ailing problems. That will take some time,” he said.