Nicolette Dirk, finance writer, justmoney.co.za
Petrol, food, electricity and transport costs are set to increase this year. Interest rates have already been pushed up by 50 basis points last week. We ask the experts to tell us how we can deal with these costs increases.
How things stand
Tendani Mantshimuli, consumer economist at Liberty, says the country’s growth rate for 2013 was lower than expected but the outlook for 2014 will be better.
“Globally the US’s currency is doing better so exports will be increasing, which is good for GDP (gross domestic product) growth,” says Mantshimuli.
However, ‘better’ does not mean without rising costs. Paul Slot, president of the Debt Counsellors Association of South Africa, warns that the interest rate hike announced last week is not the last one South Africans will see. This will in turn increase the cost of borrowing as banks hike up the rates on loans and mortgages.
Mantshimuli adds that the Rand’s depreciating value against the dollar also does not spell good things for South Africa’s economy because if it persists it will impact inflation.
“We import petrol which means it will cost us more because of the Rand’s value. Food prices will inevitably be affected as well. The consumer demand in South Africa is weak but retailers won’t be able to absorb the rising costs forever,” says Mantshimuli.
Is there help for consumers?
Mantshimuli says that leading up to this month’s budget speech government will need to come up with concrete plans as to how they will create more employment to improve the country’s economic growth.
“Government needs to assist the private sector in creating more jobs. The tax incentive suggested for businesses hiring graduates is one way but the labour relations act also needs to be re-looked,” says Mantshimuli.
Her suggestion comes amid a recent platinum strike that has reportedly crippled output at the biggest platinum mines. Economists have blamed the platinum strike for the Rand’s R11 plummet against the US dollar. Read more about this here.
And it seems there is no end in sight to the labour relation issues in the industry as the National Union of Metalworkers of SA (Numsa) members plan to join the strike today.
Learn to make your money stretch
When it comes to the factors causing prices to sky-rocket, there is little you can do to control it. But there are ways to make your money stretch during this rocky period.
Slot says it is more important than ever to take a serious look at your expenses in relation to your income.
“The only way consumers can deal with the current situation is to either get an increase in their income or reduce their expenses. This will mean changing your lifestyle as there is no other option,” says Slot.
He adds you should also look at the expenditure you can and can’t control and cut down on the ones you can control. Examples of the expenses you can control are entertainment, eating out and expensive cell phones.
As bank charges are likely to go up with the interest rate hike, Slot says you should shop around for the most affordable bank account you can find. To compare bank accounts on Justmoney, click here.
You can also save money on insurance and considering all the increases coming your way, experts believe that now is the time to phone around to for cheaper quotes. To compare insurance quotes on Justmoney, click here.
Debts can be tackled too. Thembeka Ngugi, head of customer management at Old Mutual says: “It’s a good idea to pay off your debts, but then change your spending habits by only using cash going forward.”
Tips to free up some cash:
• Pay off the most expensive debt first such as your credit cards and shop cards that charge the highest interest rates.
• Once you have cleared your most expensive debts, move onto the less expensive debts and focus on settling them by paying more than the minimum instalment amount.
• Once you’re debt-free, buy items using cash or your debit card. Invest your money to save for important goals.
“Some people are living from payday to payday and will have no spare money to save. It is important not to dip into the money when you are living beyond your means as this will result in never actually reducing your debt,” says Ngugi.