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.

Do you know how much you pay a month on bank fees? Unless you’re very meticulous and go through your bank statements, it’s likely the answer is no. While you may have a sense of what it costs to withdraw money from an ATM, or swipe your card at a till point, what about all those little extras like making online transfers, monthly debit orders and fees just to have an account?  All in, these fees can quickly add up, costing you rands and cents – rands you could otherwise be saving.

Take Rebecca Cronje who spends approximately R215 a month on bank fees just for her personal account. That is R2579 a year! Just think what she could be doing with that money if she chose a bank that offers the lowest fees instead. With the festive holiday season around the corner, she could have put a portion of these fees away into a present fund, or towards other everyday costs. Given few people will say no to having a little extra in their pocket, why do we not all pay more attention to what we spend on bank fees? 

Sure, it takes a little homework, but there are plenty of cost-comparisons online. It’s key that you compare apples with apples, to get a sense of where the biggest differences lie. For instance, at TymeBank you will pay low to no fees for everyday transactions. You’ll also pay no monthly fees. That’s why over 4 million South Africans choose to use this bank.  So quickly has the bank grown – thanks to its accessible and affordable banking – since launching in 2019 it is fast catching up to the so-called Big Five banks. In fact, the highest growth that the bank has experienced has been in the past four months alone. This goes to show how South Africans are choosing to bank digitally, while saving significantly on their bank fees. 

Switching to a more cost-effective bank is not only wise, against the backdrop of rising everyday costs, it is almost a must. Taking into consideration that as of October 2021, the average Household Food Basket costs R4 317,56 and electricity costs jumped by a whopping 15% in July along with annual municipal rates increases, money needs to stretch even further.

Adding to this, in November South Africans will pay up to R1,21 c a litre more for petrol, and R1,48 more for a litre of diesel while illuminating paraffin will rise by an eye-watering R1,45 a litre. This means that motorists will be paying 30% more for petrol compared to the start of 2021. To make matters worse, motorists should not rule out paying R20 for a litre of petrol before the end of 2021. There is also the very likely case of an interest rate hike by the end of the year. This means any loans you have will cost you more and will affect your monthly bond repayments, rent, bank loans, store cards and credit card monthly repayments. 

“2021 has seen massive price increases happen across the board. With the price of electricity and fuel rising exponentially, there is a knock-on effect on groceries, products and services. This as manufacturing, transportation and day-to-day operating costs cost more. This will affect consumers’ pockets. 

“What’s more, not everyone has returned to their pre-Covid19 salaries, and many have lost jobs and livelihoods due to the pandemic, making it even more critical to take a good, hard look at every cost that is incurred to see where savings can be made. 

“Bank fees are the one cost you can easily reduce. Now that new banks such as TymeBank are available to everyone, saving hundreds, if not thousands of rands, a year is one of the most logical places to start. This extra money can then be put towards groceries, school fees, uniforms or fuel,” says Cheslyn Jacobs, Executive: Sales & Service at TymeBank.

29 October 2021, Cape Town, South Africa – The latest expected petrol price increase is a catastrophic blow for already-stretched consumers, and the knock-on effects will be felt long after Christmas – a period when consumers traditionally over-commit themselves – as more South Africans become overwhelmed with debt. The increase doesn’t just affect the running of vehicles, says Neil Roets, CEO of Debt Rescue, the knock-on effect will be felt on grocery store shelves and among a host of other products. 

The AA recently said that South Africans can expect to pay up to 99c a litre more for petrol, while illuminating paraffin may rise by an eye-watering R1,42 a litre – the biggest increase ever. This means that motorists will be paying 30% more for petrol compared to the start of 2021. To make matters worse, motorists should not rule out paying R20 for a litre of petrol before the end of 2021. If this weren’t enough, the Reserve Bank has taken a hawkish tone, suggesting that we may see an interest rate hike as early as the next monetary policy meeting. Consumers also need to contend with increases to the contentious slate levy, a self-adjusting mechanism that the government uses to deal with daily differences in petrol price. With rising fuel prices on the way, there could be another slate levy increase too. 

Economist Dawie Roodt says that while the outlook for economic recovery remains intact, the forces driving global commodity price increases are unlikely to subside any time soon. He adds that it would be in the country’s best interests if the Reserve Bank hikes rates soon because the sooner it happens, the fewer hikes will be needed and therefore the interest rate will remain relatively low. 

“At the moment international commodity prices are quite high and there are a number of reasons for that, including certain bottlenecks globally because of economies moving out of lockdowns. This petrol price increase will also add additional upward pressure on the inflation rate in South Africa. 

However, it is important to note that internationally central banks have already started increasing interest rates and many other central banks have indicated they will be increasing rates soon. I do believe the bank will increase interest rates soon, and we expect about 25 to 50 basis points over the next six months or so. Even after these increases, interest rates will still be relatively low in South Africa. For now, clearly, there is upward pressure on inflation which means the Reserve Bank must increase interest rates and the sooner they start doing that the fewer interest rate increases will be required.” 

Roets adds that on the ground, it will become harder for consumers before conditions ease again. “When consumers cannot make basic ends meet, there’s always a risk they turn to more debt. Using debt to service living costs is a recipe for disaster – it’s like digging a hole that you can’t close.

“However, we know that many consumers lost their jobs and were forced to take pay cuts during the pandemic, yet despite this, their living costs have continued to climb. The unfortunate effect of this is that we’re likely to see even bigger numbers of consumers default and become completely overwhelmed,” says Roets.

He adds that there tends to be a consensus that the geopolitical drivers behind the massive surge in the price of Brent Crude oil are unlikely to alter drastically in the short term, while the spectre of a rate hike means there’s very little in the way of relief for consumers on the horizon. “This makes it even more pressing for people to do everything they can now to prevent themselves from becoming over-indebted, and this means navigating this year’s Black Friday specials and Christmas period extra carefully. Don’t spend what you don’t have.”

Roets says that some people have looked to a second income stream to make ends meet, referencing a growing trend in so-called “side hustles”. A recent report says that almost 4 in 10 middle-class working South Africans have started a small side business. “These include crafts, restoring furniture, teaching languages and much more. If someone has the time and ability to do something like this – without harming their current employment, it is a good idea. However, they should avoid using debt and money budgeted for living expenses to fund a small enterprise. Always follow a strict budget and start small and let it grow,” he says, “but be sure to spend every cent wisely.”

Some people don’t have the luxury of starting a small side business, says Roets, because of a host of reasons such as excessively long work hours and family obligations. “With fewer options on the table, these people should reassess their budget and find ways to reduce what they spend. Granted, many people are at their absolute limits, but by waiting before buying new clothes or electronics, shopping for grocery specials, cutting out unnecessary spending on fast food, alcohol, cigarettes and all other non-essentials, they may be able to find extra money to go towards transport, rent or the bond, and debt obligations,” he says. “However, if they have turned to debt to help finance some of their living costs and are unable to pay back their creditors, they can turn to debt counseling. It is a legal process that assists consumers to repay their debt in a more affordable manner by reducing the installments and extending the repayment terms. The consumer also obtains protection against new legal action.”