Consumers warned to brace for hard times
SOUTH Africa’s credit rating to junk status is set to have a negative impact on consumers as fuel, food and other goods are expected to increase, experts warn.
Debt counselling firm Debt Rescue chief executive Neil Roets last week warned that the impact of the downgrade would be felt next month when fuel prices increased.
He expected petrol to increase by 42 cents a litre and diesel by 39 cents.
“Growing unemployment and a slowdown in our abysmal growth rate of 1.2 percent will soon follow as foreign investors seek greener pastures.”
Roets said the increase in the fuel price was almost entirely because of the drop in the rand as crude oil prices dropped slightly over the past month.
“The rand will probably decline further in value against the dollar which is going to impact on everything from fuel to food because although South Africa is more or less self-sufficient in grains, all the inputs such as fertiliser, pesticides and diesel have to be paid for in dollars. Consumers are up to their necks in debt, carrying a combined debt load of R1.66 trillion,” he said.
“With an increase in the fuel price in May, there will be a commensurate hike in the prices of almost everything else because of the heavy reliance on road transport.”
It would affect more than half of the population who were three months or more behind in debt repayment.
“We have seen an increase of more than 20 percent over the past several months of the number of debtors approaching debts counsellors for help.
“Get rid of credit cards and store cards which carry very high interest rates and try to avoid borrowing money.”
SA National Consumer Union vice-chairperson Clif Johnston said the anticipated fuel price increase would extend to nearly all consumer goods.
Ripple effect
“The announcement often triggers a wave of price increases, even when not immediately justified. Such increases are seldom reversed, even if the economy improves.”
He said consumers would need to tighten their belts. “However, at current levels of indebtedness, this is not possible for many.”
Jason Muscat, a senior FNB industry economist, said clothing retail sales contracted for the second consecutive month, declining by -7.6 percent, furniture by -6.5 percent and hardware by -5.5 percent.
Muscat said the data showed the changing composition of household spending, away from discretionary items and disposable income being directed to cover essential items, which suggests that durables and semi-durables would shrink in the first-quarter GDP this year.
“We expect another tough year for consumers despite a moderating inflation profile. On a slightly more positive note, we anticipate the shock to confidence, and ultimately consumption, will lead to further household deleveraging.”