Medium-term Budget Policy Statement Brings Little Relief To Over-Indebted Consumers
South African consumers hoping for relief from the current financial constraints received little respite from Minister of Finance Enoch Godongwana four days ago. The minister’s medium-term budget policy statement (MTBPS) emphasised the importance of economic growth, helped along through the improvement of infrastructure. Neil Roets, Debt Rescue CEO states that while this investment in infrastructure development is much needed, it unfortunately will only pay dividends over a longer period without offering much short-term economic benefits.
Chief Economist of the Efficient Group, Dawie Roodt, on the positive side, believes the Minister is setting the right tone with a more conservative approach. “The Minister made it clear that he wants to stay within the fiscal framework. That means he would need to consolidate state finances over the next couple of years, and inevitably cut back on state spending in real terms relative to the size of the economy,” he notes. Roodt further states the Minister’s windfall of an estimated R120.3 billion extra in tax revenues could actually be more.
For consumers still reeling from a disastrous 2020/2021 period, the MTBPS will do little to assuage current financial worries. In fact, most pertinent on consumers’ minds is the massive fuel price hike earlier this month, pushing petrol up by R1.21 to close to R20 per litre. Apart from hitting travelling consumers where it will hurt most during the upcoming December holiday period, the continued rise in the cost of petrol will also lead to an increase in food prices and consumer goods.
Further impacted by Eskom’s current load shedding problems, it can be rightfully said that currently, South Africans do not have a lot to smile about, especially those burdened by debt.
“Debt can certainly be managed responsibly, and many households do so. However, when being impacted by the external factors South Africans have experienced over the past year – Covid-19, lockdown restrictions, the July riots, a spike in unemployment, load shedding and petrol price hikes – it becomes increasingly difficult to hold head above water.
“When a spouse, for example, temporarily loses a job, the household needs to choose where to spend the remaining money, often falling behind on repayments. It’s then when extra credit is applied for, which could lead to a debt spiral, as money is borrowed to pay back money borrowed,” says Roets.
As Minister Godongwana noted during his speech, South Africans are nothing else but resilient. Many households have found a way out of debt through professional debt counselling. Debt counselling legally allows the negotiation of terms with creditors, in doing so preventing being black-listed and further legal action,” concludes Roets.