Johannesburg - Experts warn South Africans fortunate enough
to receive bonuses this month to adopt a sensible approach.
Protect your financial status by servicing your debt instead
of going on a festive spree, is their strong warning.
Caution is advised as the economic outlook for next year is
dimming fast. If the eurozone crisis is not arrested, the fallout will engulf
the rest of the world and developing countries like SA are likely to be hard
If the global economy dips into another recession, jobs will
be lost, working hours cut and salary increases reduced drastically as
companies' profit margins get thinner and thinner.
It also means those that are unemployed may find it very
hard to find employment soon.
There are those, however, who may take the more carefree
route after another tough year.
Kim Royds, managing executive for Absa Retail Bank, has
cautioned consumers against this approach. Royds urged consumers to set aside a
portion of their bonus towards servicing their debt.
"The biggest gift that anyone can give themselves is to
invest a large portion of their annual bonus or any spare cash... towards
easing their debt," she said.
A large number of South African households are still in debt
with the debt-to-income ratio still hovering at around 77%.
At a recent consumer forum held at Gallagher Convention
Centre, Minister in the Presidency Trevor Manuel lamented that South Africa is
a nation of highly-indebted families.
There are 18.84 million credit active people in South
Africa, about 8.8 million of whom are described as having impaired credit.
"This is all as a result of spending money we have not
earned yet and spent it on goods that we don't need. South Africa has a low
savings rate and so people borrow money at emergency rates," Manuel said.
Tshiwela Mhlantla, managing executive of Absa Personal
Loans, urged consumers to start with servicing the most expensive debt.
"They should always seek advice from their banks or registered financial
institution," Mhlantla said.
Peter Dempsey, deputy CEO of the Association for Savings and
Investment South Africa, said short-term debt is expensive and should be
avoided because interest rates charged on this debt are high.
"Long-term debt such as a mortgage bond is funding what
is hopefully an appreciating asset, like your home," Dempsey said.
"Once you have cleared your short-term debt, you should
focus on repaying your long-term debt as quickly as possible. If you do, you
will save yourself a lot of money over the long term."
Johan Borcherds, regional director at PSG Konsult, urged
bonus earners not to spend all the money they receive. "They must put some
money away for some unforeseen expenses during the course of the next
year," Borcherds said.