Referring to building cost pressures on severely strained consumers, DebtSafe MD Wikus Olivier told Fin24 and Times Live their only means of survival will be to adopt and cultivate a simpler lifestyle.
Over and above the usual factors that impact consumers’ pockets, such as the fuel and electricity price hikes, South Africa is experiencing a severe drought which is adding to food price pressures, said Debt Rescue CEO Neil Roets. He also warned of the potential of a few interest rate hikes in 2016. Roets said consumers will also feel the brunt of the depreciation of the rand when the impact on imported goods filters through. Pointing to the already high unemployment rate of 25.5% and the addition of 2015’s matriculants to the job seeker pool, Roets told Fin24 the outlook for 2016 “is indeed dire”. “We feel that 2016 is going to be a very tough year for consumers.”
Olivier said January, being a notoriously long month with everybody’s finances stretched to the max, will hit most consumers particularly hard.
The weakening rand and severe drought will have a huge ripple effect on the cost of living, which will most likely see more people turn to credit to get by, he said. Olivier said research done by DebtSafe at the beginning of 2015 to determine the effect of consumer spending during December on savings and debt repayment had revealed a bleak picture.
Over 50% of the respondents indicated that they had difficulty servicing all their debt repayments during the month of January, with 13% of those saying they could not make any payment whatsoever. Forty one percent indicated that they overspent on their credit cards during December. What was worrying was that more than half of the respondents indicated that they did not have a budget or financial plan.
“There is no doubt that more and more consumers will fall behind on debt repayments this coming year,” cautioned Olivier.