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Petrol hike will hit indebted hard

Cape Town - The latest petrol price increase will trigger further price hikes of goods and services with dire consequences for indebted South Africans, Debt Rescue said on Tuesday.

The fuel price hike that comes into effect at midnight on Wednesday will push debt-ridden consumers into the hands of illegal loans sharks and microlenders, warned Neil Roets, CEO of Debt Rescue.

However, he noted that many consumers have reached the point where their credit records are so impaired that no legitimate microlender would take them on.

"Their only option is to seek out loans at extortionate rates from illegal loans sharks that are still widespread in especially rural areas.

"The other consequence is going to be that it is going to push many thousands of consumers into debt counselling to try and avoid bankruptcy or getting judgments against them and having their salaries docked by garnishee orders."

Motorists will be forking out more for petrol from Wednesday April 3. The price of 95 octane petrol will increase by 10c a litre at the coast and 12c a litre in Gauteng.

"There are so many people on the knife edge that the fuel price increase is just going to be the last straw that breaks the camel's back.

"When the additional price rises in food and consumer goods start filtering through the economy that is going to exacerbate the situation even further," cautioned Roets.

He said about 9 million consumers are in arrears by three or more months on at least one account, or have a debt judgment or administration order to their names.

"Poor people who are living on or below the breadline are going to be the hardest hit, with even the most basic foodstuffs out of their reach and a growing number of people going to bed hungry," Roets said.

Debt timebomb

In January, Octogen director Paul Slot said total consumer debt increased by 22% over the last four years and stood at R1.39 trillion.

Although credit providers refute talks of a consumer debt crisis, the fact remains that millions of consumers are in crisis mode and need assistance, Slot said.

"Many consumers are in a crisis mode simply because they do not have sufficient funds to service debt after paying normal household expenses.

"Any shock to the ability to repay debt such as cost of credit, price increases, salary increases, value of assets financed or unemployment will aggravate the situation," said Slot.

The average age of debt-ridden consumers has fallen from 42 to 34, showing that younger generations are fast getting into trouble, DebtBusters spokesperson Ian Wason said in March.

Wason said once a young person has too much unsecured debt, they are unlikely to ever be able to buy a house, start a business, or save for the future. In recent years, unsecured credit has been growing at rates of up to 40%.

 - Fin24

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