Carbon tax on fuel to increase the pain for consumers

ALTHOUGH the petrol price is expected to rise by only about 9 cents a litre next month, and diesel by about 10c a litre, the overall economic outlook remains bleak, with unemployment predicted to increase and consumer debt expected to climb.

Dawie Roodt, chief economist at the Efficient Group, said consumers should tighten their belts and brace for difficult times ahead.

“All the main economic indicators we track show things are going to get a lot more difficult before there is any chance of light at the end of the tunnel,” he said. “With Eskom’s debt approaching R500 billion and the utility failing to sell enough electricity to cover its daily expenditure, it’s going to be incumbent on consumers to keep it from imploding and sinking the country’s entire economy.”

With a variety of taxes chewing up 53 percent of the fuel tax, consumers should brace themselves for the introduction of the carbon tax next month, which is going to add 9c a litre to the petrol price and 12c to diesel, Roodt said.

Neil Roets, chief executive of one of South Africa’s largest debt counselling companies, Debt Rescue, said consumers should brace for increasingly tough times ahead.

“In most cases, budgets are stretched to the limit, and it is difficult to see where money is going to come from to deal with the latest round of price increases which are going to follow the latest fuel price increases,” Roets said. He said it was highly likely that the fuel price would reach R20 a litre before the end of the year.

One curious factor was the announcement by the Long4life group of companies that showed South Africans were still splurging on sporting goods and manicures, with Sportsmen’s Warehouse and salon chain Sorbet showing strong growth.

Roets said it was also painfully evident from the rapid growth of Debt Rescue that a growing number of consumers were falling behind in debt repayments, and resorting to the process of legal debt review.

“Aside from making life much more difficult for motorists, it is also going to have a wider impact on consumers, as the vast majority of goods in South Africa are transported by road. We are seeing daily records being set by the number of distressed consumers knocking on our door to be placed under debt review.

“We are going to adapt our lifestyle to adjust to tighter market conditions, doing more with less,” Roets said.

With gross consumer debt at about R1.73 trillion and the government’s gross loan debt at R2.2 trillion in the 2016/17 financial year, it is clear South Africans are in for a very rough ride, he said.

Roets said almost half of all consumers were three months or more behind in their repayments. The major culprits are credit and store cards, followed closely by unsecured debt.

The only relief for consumers in over their heads is the legally-binding system of debt review, which allows deeply indebted consumers to repay their debts over a longer period in smaller instalments.