INTEREST RATES COULD RISE BY FOUR PERCENTAGE POINTS IF SOUTH AFRICA’S DEBT IS DOWNGRADED TO ‘JUNK’ STATUS

increase savings. Burger says that bad financial decisions, taking on too much debt and spending more than you earn are signs of poor financial planning and a lack of personal financial expertise.

◆ Low levels of real (after-inflation) economic growth, resulting in anaemic job creation in the formal sector. According to the Economist Intelligence Unit, the economy grew by only 1.3 percent in 2015, gross fixed investment slowed to 0.6 percent, and the official unemployment rate increased from 25.1 percent in 2014 to 25.9 percent in 2015.

◆ High levels of inefficiency in national, provincial and local government, electricity supply constraints, uncertainty over government policy and low levels of profitability in the private sector.

Jacolize Meiring, a senior lecturer and researcher in Unisa’s department of taxation, says some consumers are extremely financially vulnerable, whereas others are not financially vulnerable at all. Some consumers manage their personal finances very well, whereas others are imprudent.

However, she points out the South African consumer landscape is characterised by unequal income distribution, high levels of unemployment and poverty.

She says financial vulnerability is the result of factors that are beyond consumers’ control, such as adverse local and international economic conditions, and those over which they do have some degree of control, such as saving and debt.

Meiring says that, since 2010, the biggest increases in consumer financial vulnerability have resulted from servicing debt and low rates of saving. These two factors seem to be the “Achilles heel” of the South African household sector, with negative savings rates and a debt-servicing arrears rate of nearly 50 percent.