South Africans Are In For A Rough 2019
While news of another major petrol price cut this January will give many a happy start to the new year, finance experts warn that the year ahead may not be as bright and cheerful. In 2018, South Africa had a challenging time, with persistent issues in the economy weighing things down. A constrained budget, high levels of unemployment, creeping growth and low consumer confidence and spending were just some of the blotches on the path. According to a debt expert, the recent petrol price cuts – while welcome relief – will do very little to change these fundamental problems, which are expected to continue this year. With more than a quarter of South Africa’s workforce unemployed – and little or no hope existing that this picture will change anytime soon – there is now the added danger of a much-reduced maize harvest because of the absence of rain. Many farmers are also in a difficult and uncertain position, with land expropriation by the government without compensation also on the horizon. There are other issues too – with one of the biggest threats to the economy being the fact that government spending is out of control. By firing a few senior executives at Eskom, it may be that President Ramaphosa is trying to send a message that the time has come to trim the fat – but the bottom line is that vastly more than this token gesture will be needed to save the South African economy. Just the cost of servicing existing debt is becoming unaffordable and is a major constraint to growing the economy. Indebted consumers South Africa entered into a technical recession in 2018, the first time since the fallout of the global economic crisis. While there has been much fanfare around the country managing to pull out of the recession in the last quarter, the increase in consumer spending that helped accomplish that means bad news for debt levels. The one spark of light on a very dark horizon was the comment by auditing firm PwC that warnings issued by debt experts had somewhat curbed consumer spending. There is a certain kind of madness that grips consumers over the holidays where spending becomes totally irrational and this is not helped by the massive advertising campaigns that retailers launch at this time of the year to encourage shopping.
The people involved in the debt counselling industry see the extremely negative results of binge shopping in the following year when they have to assist consumers to deal with the mountains of debt they had incurred. The one consistent comment
they get is this sense of entitlement that because everybody else was shopping they felt entitled to join the shopping stampede. Tough 2019 Economists warn that this year is going to be a tough year and that consumers who had difficulty making ends meet in 2018 are going to find it much harder in 2019. Total consumer debt now stands at close to R1.73-trillion (according to the latest figures released by the reserve bank) which clearly shows that South African consumers have not cut back on spending. A recent World Bank index also showed that South Africa is one of the most indebted countries in the world. Almost half of all consumers
were three months or more behind in their payments. The major culprits are credit and store cards followed closely by unsecured debt. The only measure of relief for consumers who are 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 of time in smaller instalments often at a discount. Lenders are sometimes willing to take a cut if it means they can avoid having to involve debt Collectors or foreclosing on the fixed properties of