With lockdown restrictions eased, the vaccination programme rolling out and the country now off restrictive travel ‘red lists’, a glimmer of normality may be returning after a tumultuous year-and-a-half.
But, as medical and scientific experts have repeatedly warned, now is not a time for complacency as rapidly returning to business as usual could undo all the progress that has been made.
Benay Sager, head of DebtBusters, the country’s leading and largest debt counsellor, says the same is true for people who have been lucky enough to keep their jobs but at the cost of sacrificing bonuses and incentives and agreeing to salary cuts.
“Many consumers have had to tighten their belts as employers implemented pay cuts to save on costs and stay in business. As the economy slowly starts to recover, most salaries are re-instated and things seem to be returning to normal, it may be tempting to return to old spending habits, but that could land you in financial trouble.”
Besides the year-end summer holidays and festive season, there’s plenty to tempt consumers during the last quarter of the year.
Spring sales abound as retailers try to clear their shelves of last season’s lines and winter clothing and make up some of the revenue lost during successive lockdowns. Following hard on their heels are further inducements to spend, including Black Friday and Tech Tuesday.
“Although it may feel that things are returning to normal, consumers need to bear in mind that the payment holidays instituted in 2020, which may have helped them at the height of the pandemic, are now over and that similar relief is unlikely in the immediate future.
“Consumers have also been shielded by low inflation and interest rates. There is upward pressure on inflation. In addition, the Reserve Bank is likely to increase interest rates at some point in the near future. Consumers who have recently taken advantage of low interest rates to get a bond or finance a car are most at risk as interest rate increases will impact them immediately, increasing their monthly payments.”
The data in DebtBusters’ last Debt Index bear this out. Between Q2 2016 and Q2 2021 nominal incomes were on average 3% higher, but when cumulative inflation growth of 24% is factored in, real income has shrunk by 21%.
“The bottom line is that if you have debt obligations, now is a risky time to be spending money unnecessarily, especially if that means taking on more debt.”
South African consumers’ debt-to-income ratio is at its highest level ever, with many more people struggling to keep up with monthly repayments.
Sager says, if you are in a situation where the combination of your monthly expenditure and debt repayments regularly exceeds your income, you may need help.
A free debt assessment will show whether or not you need to consider a debt management solution such as debt counselling. The assessment will also tell you whether you are at risk of increased debt repayments if interest rates go up by looking into the type of debt you have.
The debt counselling process is regulated by the National Credit Act and allows consumers to pay off their debt at lower interest rates and extended payment periods. It’s an option that more consumers are investigating, with enquiries increasing by 18% compared to a year ago.