While counting votes, South Africa faces a ticking time bomb as consumers buckle under the ‘new normal’



Published May 31, 2024


By: Neil Roets

South Africans have been collectively waiting with bated breath for some small financial reprieve from the relentless price hikes of the past few years that have driven them to the brink of despair, chief among these being the highest interest rate the country has had to contend with in over a decade, fuelled by soaring inflation.

The announcement by the Reserve Bank Governor Lesetja Kganyago earlier today that there will be no immediate relief for its citizens as the repo rate holds steady yet again at 8.25% - at least until the end of 2024 - has been met with a pervading sense of apathy across the nation.

This is in line with the recent Monetary Policy Review from the SARB revealing that it currently sees the start of the local interest rate cut cycle well into 2025, raising expectations that the cutting cycle will come long after the Federal Reserve Bank starts its downward cycle.

With much speculation doing the rounds regarding the impact of the general elections on the SARB’s decision, Efficient Group economist Dawie Roodt said he was confident that the MPC would not be influenced by political developments, but that the election outcome could affect exchange rates, which would influence inflation.

However, some economists, such as those at Nedbank, still anticipate at least two rate cuts in 2024 – 25 basis points in September and again in November – but projections that the central bank will continue to hold on rates for the rest of the year are also starting to emerge.

This news comes hot on the heels of the fourth consecutive hike in petrol earlier in May, that has hit motorists and commuters very hard – leading to increases in public transport costs, and fuelling cost-push inflation that contributes to the overall inflationary pressures within the economy.

“South Africans have had their last hope dashed by this bitter news,” says CEO of Debt Rescue Neil Roets. “They have long since reached the end of the line financially, and have been hanging on by a thin thread, believing a turning point in the repo rate will be reached in time to save them. Now, with all hopes dashed, desperation has become the new normal for the country’s citizens.

“Another ticking time bomb that has broad economic implications, is the ever-increasing unemployment rate,” Roets warns. “With 13.1 million people currently unemployed, South Africa ranks among the countries with the highest unemployment rate in the worlds,” says Roets.

“The impact of this is far-reaching. Unemployment results in poverty, social exclusion, rising crime and social instability, mentally and physically. This is one of the biggest red flags right now, that the country dare not ignore,” Roets cautions.

Statistics South Africa recently released its Quarterly Labour Force Survey for the first quarter of 2024, ending March 2024. According to their results, the official unemployment rate increased by 0.8% from 32.1% in the fourth quarter of 2023 to 32.9%.

In real terms, this means that an additional 308 000 people join the ranks of the approximately 30 million people currently living below the national upper poverty line of R1 558 per person per month, with households now facing impossible decisions such as whether to use their spending money on nutritious food or pay for transport to get to work or school.

And still there is no end in sight to the relentless price hikes for basic necessities, with living expenses, which include groceries, energy, transportation and communication, accounting for around 85% of monthly income.

“It is not surprising that millions of people have had to incur enormous debt – no longer being able to keep up with their lifestyle needs – but simply to make it through each month, as living expenses along with the exorbitant interest on vehicle, home and personal loans gobble up much of their income. Consumers’ Debt to GDP ratio is significant after all,” says Roets.

“My advice to those who find themselves in a debt trap is to seek help through debt review, where a registered debt counsellor can assist you to manage your financial predicament. It is never too early to ask for help,” Roets says.

Roets is the CEO of Debt Rescue.