Electricity, fuel hikes will impact debt-stressed consumers
The price of Eskom electricity that increases by 14% today on top of the substantial fuel increase that kicks in at midnight are going to hit consumers like a ton of bricks.
Neil Roets, CEO of Debt Rescue, said consumers had every right to feel hard-done by the double whammy that is going to cost them dearly.
“The fact that electricity is increasing at almost three times the rate of inflation is something that nobody in government seems to care about nor about the fact that a whole range of additional taxes and levies are being added to the petrol price to take it to a historical high.
“Consumers are no longer able to fund the lavish lifestyles and corrupt practices of our government who, despite yearly tariff increases, have shown to be unable to keep the lights on.”
Dawie Roodt, chief economist with the Efficient Group, said the Eskom tariff increase that comes into force today will be the first of many to come.
“Eskom is hopelessly bankrupt, it is corrupt and is massively overstaffed and the majority of their power stations would require billions of rand to get them to properly function. Without a doubt, they are simply going to keep on increasing their tariffs,” Roodt said.
“The situation at Eskom is dire – debts exceeding R420 billion, gross operational failures, general mismanagement and corruption is still very much the order of the day,” Roodt said.
Roets said the increase in both the fuel and electricity prices was not only going to hit consumers but also the business community who relied on Eskom to keep their doors open and on fuel to keep goods and services running.
“This is without a doubt one of the most difficult periods that consumers have been subjected to for a very long time.
“We are seeing daily records being set by the number of distressed consumers who are knocking on our doors the be placed under debt review.
“For many even that is no longer an option because they have become unemployed as businesses that employed them have had to shut their doors.”
It was widely expected that the Rand would continue to weaken against the dollar and there were also clear indications that the price of crude oil would continue to rise leading inevitably to further hikes in the fuel price in months to come, Roets said.
“With the ANC’s land expropriation policy very much on track with our president seemingly committed to it and recently telling us that we had all “better just get used to it because it was going to happen”, there is little chance of the rand strengthening or of more substantial foreign direct investment coming into the country.”
With gross consumer debt at around R1.73-trillion and the government’s gross loan debt at R2.2trillion in 2016/17 financial year, it is clear that South Africans are in for a very rough ride, Roets said.
The fact that ratings agency Moody’s decided to withhold its announcement whether it was planning to downgrade South Africa’s credit rating should be seen as only a temporary reprieve, Roets said.
“With the economy in its present shape, my best guess is that we are going to be downgraded which is further going to increase the cost of borrowing for the fiscus,” Roets said.
Roets said almost half of all consumers were three months or more behind in their repayments. The major culprits are credit and store cards followed closely by unsecured debt.
The only measure of relief for consumers who are in over their heads is the legally-binding system of debt review which allows deeply indebted consumers to repay their debts over a longer period of time in smaller instalments often at a discount.
“Lenders are sometimes willing to take a cut if it means they can avoid having to involve debt collectors or foreclosing on the fixed properties of debtors.” Roets said.
“An issue that is becoming more prevalent among distressed consumers are the constantly rising fees charged by municipalities for water and electricity services. The latest Nersa increase awarded to Eskom for electricity is going to have a major impact of deeply indebted consumers.