Hard-pressed consumers eye rates move

2016-05-19 14:05
Post a comment 0
credit card,debt iStock

Cape Town - Debt-strapped consumers will be keeping a close watch on SA Reserve Bank (Sarb) governor Lesetja Kganyago when he announces the bank's Monetary Policy Committee's decision later on Thursday.

Debt experts, although torn on which way the decision will go, are leaning strongly towards a call for no change.

Debt Rescue CEO Neil Roets said on Thursday there is a strong probability that the repo rate will remain unchanged in light of the recent unemployment stats.

View: INFOGRAPHIC: What SA's alarming unemployment figures show

Statistics SA's Quarterly Labour Survey released on May 10 showed that South Africa shed a total of 355 000 jobs across the formal and informal sectors of the economy in the first quarter of 2016 - soaring to the highest rate since 2008.

The survey indicated that the biggest job losses were observed in trade (119 000), manufacturing (100 000) and construction (77 000).

Roets said he is reasonably confident that the Sarb will not increase the repo rate on the issue of economic growth.

“The only way the economy can grow is through robust business activity – especially in the SME sector. But SMEs can barely cope with the already high interest rate and therefore are unable to expand their business activities."

Read: Economists see close call for rates

Roets said when businesses struggle, one of the first things they do is cut jobs.

He said in the unlikely event that the Sarb does decide to raise rates; consumers should brace themselves for even more hard times.

"Based on the levels of over-indebtedness already observed by consumers, it is a foregone conclusion that another interest rate increase will be devastating to their already tight budgets.

"Any increase, however small, coupled with the increased cost of living would place severe strain on consumers who are clearly struggling to make ends meet."

Ian Wason, MD of DebtBusters said the economy is already wobbling under the strains of political uneasiness, and another interest rate hike would be a huge blow for consumers.

He said a fourth consecutive increase (since November) will be of utmost concern to consumers in light of the burden of increasing food, electricity and fuel costs.

“While we recognise that it is imperative to curb inflation, an increase in the repo rate now will hurt the over-indebted consumer the most. We fear that these consumers are already being squeezed too much.”

The latest NCR statistics confirm a crisis situation where 54% of South Africa’s credit active consumers are struggling to pay their monthly debt obligations on time.

“Consumers with vehicle finance, mortgages, clothing accounts and credit cards are going to feel it the most. Having already felt the pressures of huge inflationary increases in their expenses, another increase in their debt repayments could be the last straw,” he added.

*Add you voice by sharing your debt experiences, debt-busting tips and insights. Have a question? Ask our experts.