First National Bank (FNB) recently revealed that middle-income consumers were spending up to 80% of their monthly salary within five days of being paid.
In addition, salaried middle-income consumers with credit spend, on average, 30% of their income on unsecured credit and 35% on secured credit.
CEO of Debt Rescue Neil Roets says that their latest survey results show this to be true, with 40% of consumers saying they have too much debt to cope with, and results showing that 40% have impaired credit records.
He warns that this is akin to a national disaster given that countries around the world rely on the middle class to keep afloat – and South Africa is no exception.
He says the danger lies in the possibility - and it’s becoming more of a reality with every passing day - of the bulk of South Africa’s middle class being pushed below the poverty line.
“The reality is that South Africans are being crushed by the volley of living cost increases that just keep hitting them from all sides and can no longer cover their basic costs – and it’s the middleclass consumer that has turned to credit en masse to see them through. This is a very precarious position to be in, both for consumers and for the country at large. The repercussions of which will soon be felt as consumers head for a tighter money crunch, as a perfect storm is stirred up by increased interest rates, rising inflation and steeper fuel prices,” he cautions.
Statistics SA’s latest consumer price index shows that inflation is going through the roof - with annual consumer price inflation quickened to 6,5% in May this year from 5,9% in April and March, breaking through the upper limit of the South African Reserve Bank’s monetary policy target range.
This is the highest reading since January 2017 when the rate was 6,6%. And it’s no surprise that fuel in particular is a major contributor.
In fact, the impact of fuel is so great that removing it would see the headline rate fall from 6,5% to 5,1%.
“There is no point in advising consumers to assume the brace position and buckle up – they have already done this, and still they cannot make ends meet. What people need now is solid and constructive advice on how to cope,” says Roets.
His advice to consumers - especially those in the middle and lower-income groups - is to take a careful look at the monthly budget and do a thorough inspection of where you can cut costs by being extra vigilant – because at this point every penny counts, and in the months to come it can make the difference to living above or below the poverty line.
Electricity
The electricity bill is a sizeable expenditure for most households and there are small adjustments that can make a big difference.
Replace light bulbs with energy efficient ones; invest in a geyser blanket, to retain the heat so that the geyser doesn’t heat up that frequently; review the thermostat temperature; and look at investing in a timer so that it only heats up when the geyser is in use.
Groceries
Another big saving can be made by adjusting shopping habits.
Something as simple as planning each shopping trip can make a big difference.
Make a list of what you need before you go to the mall or the local store, to ensure you don’t forget items or buy things that you already have.
Check the community newspapers for specials on offer, and centralize your shopping, so that you only shop at stores in close vicinity of each other – that way you end up saving on fuel and your grocery bill. Remember to use your loyalty cards, to get those instant savings or loyalty points. It can make a big difference to the total amount you spend.
Plant a Garden
If you have some space, plant some hardy, easy to grow vegetables like spinach, tomatoes and green peppers – or start a community garden where everyone grows something different and swop out your produce when you harvest, to save on your food bill.
“Looking after your credit record is one more important area where taking charge can make a big difference” he says. “Your credit record affects how much you can borrow and what interest you get charged – and when you are overindebted and you are paying off accumulated interest, the lower the better.”
Debt Rescue has seen a year-on-year increase in the number of South Africans seeking debt relief – and there is little doubt that this number will go up sharply in the next few months.
“My advice to those who are in a debt trap is to seek help from a registered debt counsellor who can assist them to manage their financial predicament,” he concludes.
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