Falling Petrol Price
Falling Petrol Price – The decision by the South African Reserve Bank on Thursday to keep the repo rate steady at 6.75% as well as the expected decrease in the price of petrol and diesel will give deeply indebted consumers a welcome break after the body-blows of last year’s string of downgrades and fuel price increases.
Neil Roets, CEO of Debt Rescue, one of the largest debt counseling companies in the country, said the fuel price decrease was especially welcome with petrol expected to decrease by some 41 cents a liter while diesel would probably drop by as much as 26 cents a liter during the first week of February.
“We are by no means out of the woods yet. Despite the welcome resurgence of the rand, prospects for real economic growth look slim while unemployment and poverty would almost certainly be on the rise for the rest of the year.”
Falling Petrol Price – Independent economist
Independent economist Dawie Roodt concurred saying one of the biggest dangers facing the country was the near-certainty of further downgrades by the major rating agencies later in the year. “While what I call the Cyril effect (following the election of Cyril Ramaphosa as president of the ANC) has undoubtedly played a role in the strengthening of our currency, there is a very long way to go to undo the damage that was wrought by our current president.
More than half of all South Africans are three months or more behind in their debt repayments, collectively owing some R1.71 trillion in debt. It is highly likely that there will be further downgrades to our sovereign debt by the rating agencies reducing the status of our bonds fully to junk status. This will undoubtedly have an impact on the overall economy further reducing the trickle of foreign direct investment coming into the country which we so desperately need for job creation and poverty alleviation.
Roets repeated a warning he made late last year that consumers should tighten their belts and brace for tough times ahead. “One of our biggest concerns are the hundreds of thousands of matriculants and new graduates who join the job market full of hope and expectation every year only to find themselves unemployed on a near-permanent basis. Unless we can somehow kick-start the economy to create employment for these people and for the millions of other jobless South Africans, we could be facing major problems down the road that will include further political instability and more violent uprisings eventually threatening civil order.
Roets said most South African consumers had reached the point where they had to face the fact that they could not maintain their lifestyle as they did in the past. It has now become a matter of survival. Opening more accounts and acquiring more store cards and credit cards is not the answer. Roets said the gravity of the situation was reflected by the fact that Debt Rescue was showing a year-on-year increase of almost 25% in clients who wanted to go under debt review because they could not repay their debts. He said going under debt review remained the best option for indebted consumers. South African consumers have consistently notched up the unenviable reputation as having one of the highest debt ratios as a percentage of GDP among emerging market economies, Roets said.