Luke Hirst, MD of Debt experts Debtbusters, says ‘Consumers are likely to be hit hard. While the increase in Eskom's tariffs is certainly better than the requested 35%, it will still have a huge impact. The basket is only becoming more expensive, with electricity and transport costs soaring, while at the same time emptier than ever due to consumers affordability diminishing. '
‘According to the Credit Bureau Monitor, Q3 figures show 18 million credit active consumers with only 41.2% up to date with their payments - that is 10m people who are in arrears in their debt. We expect a sharp deterioration in the Q4 stats as inflation takes a toll and the level of debt stress increases accompanied by a surge of applications by consumers for Debt Review.'
Finance Minister Pravin Gordhans 2010 budget speech also put a damper on 1.2 million of the population, as he told public servants the salary increases they received in 2009 placed a significant strain on the economy, warning them they won't be so lucky this year.
Hirst continues, ‘Not only are wages decreasing, but 13th Cheques and bonuses seem to be becoming redundant. Labour Law clearly states that the payment or non-payment of bonuses is a matter entirely for the employer to decide, and to negotiate with employees. Consumers need to be aware that despite having received a bonus for the last 10 years, they may not get one this year - or ever again. ‘
For the consumer this means fewer funds available to pay their debt, or if they are under debt review, their rehabilitation amounts. It will most certainly be a tight squeeze between no salary increases, huge inflationary pressure and debt obligations - the result? Banks get less money due to consumers being left no choice but to default on their payments.
‘Some form of relief needs to be given to the consumer. One can only hope an interest rate cut is around the corner when the MPC meets today, this needs to be a cut of at least 2%.'