STRESSED CONSUMERS, and there are many of them in SA, should cancel this year's Christmas spending spree, and that includes the traditional Christmas holiday. The combined blow of a hefty 43c increase in the petrol price and next week's inevitable 0.5% increase in the repo rate, which means a prime overdraft rate up to 14.5%, are just too much for consumers whose household debt already totals 80% of household income.
Trader Vic has never attached any sentimental value to Christmas and also prefers holidays out of season rather than paying R10, or is it R15 already, for a little glass of sweetened warm water on an overcrowded beach.
But we're not talking about Trader Vic's sentiments here, but about the people who can least afford the trend at Christmas time to splash out with their money, and especially the bonus.
Just in case you haven't made the calculation yet - a half a percentage point increase in interest rates will increase the monthly repayment on a R1m mortgage by about R420/month. The higher fuel price will add at least R130/month to the running expenses of the ordinary household. Add to this a slightly, or considerably, higher credit card payment in January and February, thanks to reckless Christmas spending, and you will feel all the distress of the stressed consumer.
Last week, Fin24 was swamped with complaints, threats and senseless political arguments simply because we had the effrontery to report that the petrol price was going up by 43c/litre. Some or other disc jockey at a Pretoria radio station that I sometimes listen to in the morning even accused the government of insensitivity because they increased the fuel price just before the holidays. With such rubbish being broadcast, I can see why consumers are so ill informed.
The fuel price is adjusted monthly, and in December we pay the price that was the actual cost of fuel in November. I don't know whether disc jockeys are literate or not, but perhaps someone who can in fact read can tell him.
Use your bonus to pay off debt
To all the stressed consumers, some simple advice: cancel Christmas and your December holiday. Use your bonus to pay off some outstanding debt, and if one day you get so far that the bonus can be used to put you one payment ahead in paying off your car or house or whatever, you will really enjoy a happy Christmas.
Trader Vic comes from a poor background, and some of his friends - yes, there are a few left - sometimes accuse him of being miserly.
Recently I was standing in the queue at Woolworths. By the way, Trader Vic is seldom prepared to pay this retail group's high prices for ordinary items. You can get lower prices, and sometimes even better quality, elsewhere. But that's beside the point.
The person ahead of me had to pay R182 for some shopping, including a smallish butternut, which rather looked shrivelled to me for R15. When the cashier asked him, "Straight or budget?" after he handed over his credit card, the reply was a firm "Budget".
Tito Mboweni has often complained about credit cards that are so easily obtainable.
Buying vegetables on 'Budget'
Trader Vic, on the other hand, is complaining about consumers who buy vegetables at a notoriously expensive shop using the budget facility of their credit cards. The consumer needs education, not higher salaries and more credit cards. Good education is accompanied in part by hardship - hardship like higher interest rates, even if this means homes being sold on auctions.
In October 2006, I asked for a sharp 2% increase in the repo and other lending rates. Mboweni didn't listen to me, in fact he didn't even reply to me. However, one reader called me "a silly, old goat".
Inflation, and that's in fact CPIX, is currently more than 7%, the current account of the balance of payments is heading for another shocking deficit, and the Reserve Bank's quarterly report coming out in December will probably show that household debt is now more than 80% of household income.
Even earnest prayers along with the next 0.5% interest rate increase won't help. Christmas 2007, with its usual excessive and irresponsible spending, should be cancelled.
- Fin24