With massive fuel price increases having come into effect, the recent 15% rise in electricity tariffs, and a likely interest rate hike coming by December, budget strain is already being exacerbated through an increase in the use of unsecured credit, which could sink people into further debt – just before we head into the biggest spending period of the year.
“This as South Africans pay R1.21 a litre more for petrol and R1.48 more for a litre of diesel. Motorists should not rule out paying R20 a litre for petrol by the end of 2021,” says Neil Roets, chief executive at Debt Rescue. “The fuel price has increased from R14.86 to R19.54 since January 2021. This is a staggering 31.4% increase.”
A recent study by the National Credit Regulator indicates consumers are struggling to repay their short-term credit. From the study it showed credit cards were the type of credit most prone (23%) by consumers to increasing their debt because of Covid-19 and the reason most regularly cited for increasing debt above the original loaned amount was “late or missed payments” for those with unsecured credit transactions. Those with available funds in their credit cards utilised their facilities more regularly than other product types during Covid-19, especially in the case of those who had lost a portion of their income or savings.
Similarly, the TransUnion Consumer Pulse Study for the third quarter of 2021 showed 41% of consumers reported a substantial proportion of South Africans remained under financial pressure, as they’ve been in arrears for a bill or loan in the past three months. From those that had missed payments, 33% reported missing one and two bills or loans, and 17% missed three bills or loans.
“From all of this it is evident that consumers are struggling to make ends meet, by living on credit to cover their debt and living expenses. It’s a very dangerous situation indeed, with Black Friday coming up,” says Roets.
While the lure of great deals may entice the best of us, the frenzy that is called Black Friday can plunge many South Africans into further financial trouble. This as general day-to-day costs keep on climbing.
According to Debt Rescue, which recently ran a survey among 1 000 South Africans, it revealed 86% of women indicated they will participate in the Black Friday weekend, versus 15% of men, and among all shoppers, 60% will buy their goods on credit, instead of missing out on a good deal. Women make use of store and credit cards far more than men. The reason for this is largely because women traditionally do the household shopping.
For consumers planning on spending on Black Friday, Roets advised they draw up a plan – and then stick to it.
“Have a set budget of the amount that you can afford to spend. Then do your homework into what you want to buy so that you don’t get caught up in the frenzy of shopping for the sake of it as there is a 50% discount. Know your prices, as the deals aren’t always as good as they seem. Black Friday deals have also started earlier and earlier, so be mindful of your salary, and only spend money that you have available and avoid buying goods on store or credit cards as you will incur interest on those purchases, which could easily negate any discount you were hoping to take advantage of,” he says.
With Christmas around the corner, consumers may also be tempted to buy gifts on credit too – which could put them further into debt. A budget is critical in this time. Going over budget can lead to a long-term debt spiral, as historically consumers would have relied on year-end bonuses to repay the debt incurred in this time. However, bonuses are less likely each year, and particularly this year due to financial impact on businesses because of the pandemic.
“Should you find yourself in too much debt, and cannot afford to pay back your creditors, there is relief in the form debt counselling. Over-indebted consumers can legally repay debt at a lower monthly instalment over a longer period of time to ensure that they are still able to afford their living expenses,” says Roets.