Let them eat plas­tic?

CityPress - - Voices -

Just as in­ter­est rates in South Africa, and prac­ti­cally the en­tire world, are set to rise, the depart­ment of trade and in­dus­try has in­ter­vened to soften the blow for con­sumers. Any help is welcome. This week it was re­vealed that con­sumer con­fi­dence had reached a 14-year low.

The move to re­con­fig­ure the way that Re­serve Bank gover­nor Le­setja Kganyago’s repo rate af­fects the credit mar­ket did not ap­pear in a vac­uum. It is cal­cu­lated to take the sting out of the tail of the in­evitable ris­ing tide of in­ter­est rates.

All over the world, in­ter­est rates have bot­tomed out as gov­ern­ments have tried to fend off the ef­fects of the eco­nomic cri­sis by pro­vid­ing easy credit. South African debt, like all debt, will be­come more ex­pen­sive in the near fu­ture – there is no way around it. The depart­ment’s plan will re­duce the im­pact by stop­ping banks and other lenders from pass­ing on the hikes to the full ex­tent that has so far been pos­si­ble.

Mi­crolen­ders see it as a mis­guided at­tempt to achieve greater ac­cess to credit by drop­ping prices. The mashon­isas are wait­ing – and grin­ning, they say. Many South Africans can only rea­son­ably be given credit at rates of more than 30%, they say.

If that can­not be done legally, there are more than enough peo­ple will­ing to do it il­le­gally.

Gov­ern­ment be­lieves it is fac­ing a tough choice be­tween ac­cess to credit and man­age­able debt bur­dens.

In­dus­try says the real choice is be­tween vis­i­ble and reg­u­lated usury or in­vis­i­ble, free-for-all usury.

One thing is sure: South Africans are still bor­row­ing en masse. Ac­cord­ing to the latest con­sumer credit sta­tis­tics, South Africans have debt of about R1.6 tril­lion. Half of that is re­lated to mort­gages and another 22% is tied to cars.

Credit cards, over­drafts and the bal­loon­ing uni­verse of store cards add up to another R207 bil­lion.

Short-term loans are boom­ing. A to­tal of 1.34 mil­lion lit­tle loans were granted in the first quar­ter of this year – 70% more than a year ago.

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