Silver lining for debt-hit consumers
Repo rate unchanged, fuel price to drop but dark clouds loom
CONSUMERS, drowning in debt after the December holidays, will welcome the good news that the repo rate remain unchanged at 6.75% and the fuel price would drop. The Automobile Association said consumers can expect a 41c drop in petrol, while diesel will go down by 23c and illuminating paraffin will drop by 26c.
“The rand/US dollar exchange rate has had one of its flattest periods of trading in recent times. It has traded in a very narrow band between R12.30 and R12.40 to the US currency since the last week of December, bringing some welcome stability.”
The association also noted that the international prices of petrol and diesel were also stable over the same period, but there was a slight climb in both in the second week of January.
“Continued stability in fuel prices for 2018 will largely depend on political and economic factors that affect South Africa’s attractiveness as an investment destination.”
Financial expert and chief executive of Debt Rescue Neil Roets said the fuel decrease was especially welcomed.
“We are by no means out of the woods just yet. Despite the welcome resurgence of the rand against other major monetary units, prospects for real economic growth look slim while unemployment and poverty would almost certainly be on the rise for the rest of the year.”
Roets said consumers should continue to tighten their belts as times are set to be tough ahead.
“One of our biggest concerns are the hundreds of thousands of matriculants and new graduates who join the jobs market full of hope and expectation every year only to find themselves unemployed on a near-permanent basis.
“Unless we can kickstart the economy to create employment for these people and for the millions of other jobless South Africans, we could be facing major problems down the road that will include further political instability and more violent uprisings eventually threatening civil order.”
Roets said most South African consumers had reached the point where they would simply have to face the fact that they could not maintain their lifestyle as in the past. “It has now become a matter of survival. Opening more accounts and acquiring more store cards and credit cards is absolutely not the answer.”
Economist Dawie Roodt echoed Roets’s sentiments saying one of the biggest dangers facing the country was the near-certainty of further downgrades by the major ratings agencies later in the year.
“While what I call the Cyril effect (following Ramaphosa’s election as ANC deputy president) has undoubtedly played a role in strengthening our currency, there is a very long way to go to undo the damage wrought by our current president and his cohorts.
“More than half of all South Africans are three months or more behind in their debt repayments, collectively owing some R1.71 trillion in debt (latest National Credit Regulator stats).
“It is highly likely that there will be further downgrades to our sovereign debt by the ratings agencies reducing the status of our bonds fully to junk status.
“This will undoubtedly impact on the overall economy, further reducing the trickle of foreign direct investment which we so desperately need for job creation and poverty alleviation.”
WE ARE BY NO MEANS OUT OF THE WOODS. UNEMPLOYMENT AND POVERTY WILL ALMOST CERTAINLY BE ON THE RISE FOR THE REST OF YEAR