By Given Edwards
In the wake of the South African Reserve Bank’s (SARB) decision to maintain the repo rate at 8.25%, a growing financial crises looms over South Africa. Despite this move aligning with expert forecasts, the economic relief anticipated by many seems distant.
The hold on interest rates comes amidst a concerning rise in inflation, escalating from 5.4% in September to 5.9% in October.
The recent surge in inflation, as reported by Stats SA, is primarily attributed to increased transport costs and a spike in food prices. The latter is a consequence of heightened demand for poultry products, spurred by panic buying in the wake of a bird flu outbreak.
This surge in essential goods has placed significant strain in consumers, who are increasingly relying on credit to manage daily expenses.
Neil Roets, CEO of Debt Rescue, highlights the perilous nature of this trend. The growing dependency on credit for basic needs like groceries is not sustainable and poses a significant risk to financial stability.
Roets emphasizes that earlier hikes in interest rates have already had a detrimental impact, notably escalating loan repayments. This increase has triggered a spike in defaults on vehicle and home loans, further exacerbating the financial distress of many South Africans.
The real estate market reflects this economic strain. Lightstone data reveals a notable increase in distressed house sales, with a jump from 2% to 3.7% in homeowners selling their properties within two years of purchase from May 2022 to a year later.
The primary drivers are escalating living costs and the debt traps many have fallen into post-pandemic.
The financial burden on the average South African is substantial. Approximately 63% of their take-home pay is allocated to debt servicing, a figure that rises to 67% for those earning R35000 or more per month.
The NedFinHealth Monitor presents a grim picture: 69% of South Africans struggle to pay bills on time, and 33% have failed to make home loan payments over the past year.
Click here to read the full article: https://insouthafricamag.co.za/south-african-debt-crisis-deepens-as-interest-rate-relief-fails-to-alleviate-struggling-consumers/
