POWER STRUGGLE

they accrue large amounts in interest. “Look at what you can afford and limit your monthly spending to below that amount,” Lombard said.

“You need to pay back the debt in full every month. A credit card can, however, be a useful financial tool for building a good credit rating if you can illustrate a good track record for settling your account on a monthly basis.”

Meanwhile, a leading economist blamed failed state-owned enterprises (SOEs) and the stagnant economy for the fact that millions went to bed hungry each night.

Efficiency Group chief economist Dawie Roodt said the majority of people in poverty were not social grant recipients, 59% of whom were unemployed young people.

Roodt said it was likely the situation would deteriorate further, with the likelihood increasing of a downgrade from rating agencies.

He predicted Moody’s would downgrade the economy to junk status next month, considering that SOEs’ financial troubles were worsening.

“If there was any doubt that Moody’s would downgrade South Africa’s sovereign debt to subinvestment grade, the latest figures from Eskom’s financials that showed the SOE was bankrupt could be the deciding factor. “The moment the government and its SOEs have to pay more for borrowed money, it has no option other than to pass the increased borrowing costs on to the consumer.”

He said this meant prices would go up and consumers would become indebted. In July, Fitch rating agency put the country at a negative noninvestment grade, while Moody’s rating in March was a lower grade.

Debt Rescue CEO Neil Roets said consumers were in for a very rough ride, with nowhere to turn for relief, as they faced higher prices on necessities.

He said that the tough financial times were pushing more consumers to buy necessities like food on credit, leaving many in debt.

“Although many of us have already reached the point where there is nothing left to cut, we are going to have to adapt our lifestyles to adjust to tighter market conditions by doing more with less.” –

It is likely situation will deteriorate further

Picture: Nigel Sibanda Residents barricade the road leading to Thabo Mbeki informal settlement in Johannesburg yesterday in protest at the removal of illegal electricity connections.