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SA’s squeezed consumers ‘going into debt just to buy food’

| Economic factors

Many people are deep in debt and some are defaulting on payments and resorting to loans to feed themselves, in an ever-deeper spiral.

Some people are taking loans just to buy food in ever greater numbers and tomorrow’s 01/05/2019, 54 cents a litre increase in the petrol price is expected to have an even more damaging effect on the economy.

Neil Roets, CEO of Debt Rescue, said yesterday there was “clear evidence” consumers were now resorting to credit just to put food on the table.

Aside from making life more difficult for motorists, the petrol price increase was going to have a wider impact on consumers as the vast majority of goods in South Africa were transported by road.

“In its most recent results, Pick n Pay noted that its Pick n Pay Store account now has 125,000 active customers – an increase of 25% year-on-year,” Roets said in a statement. “While it is undoubtedly used for items besides food, one can safely assume that the main card expenditure was on food.”

Roets said it was also “painfully evident” a growing number of consumers were falling behind in debt repayments and resorting to the process of legal debt review, and estimated there were approximately 280,000 consumers actively under debt review.

A Stats SA report recently found the average salary-earning individual in SA earned around R21,000 a month. Of this, wrote economist Francois Stofberg of the Efficient Group, they paid about 20% (R4,200) in personal income taxes (PIT).

“Luckily, individuals receive various sorts of rebates, like medical aid, pension fund and other rebates. This reduces the PIT from 20% to 11%,” Stofberg said.

“However, and here is where government claims their pound of flesh, indirect taxes account for almost 19% of the average individual’s salary.”

Stofberg noted indirect taxes included 15% value added tax on almost everything a household bought, fuel levies, sin taxes, property taxes, car and TV licences and so on.

“In the end, an average salary-earning South African only takes home R14,700 each month. Such an individual might receive R21,000 cost to company, but pays R6,300 (30%) to government for the privilege of living in SA and using their services,” said Stofberg.

Roets said the fuel levy alone had risen by more than 22% in the past three years and when the carbon tax kicked in later in the year, this would cause a further spike in the price of all grades of fuel.

With gross consumer debt at about R1.73 trillion and government’s gross loan debt at R2.2 trillion in the 2016-17 financial year, it is clear that South Africans are in for a rough ride, Roets said.

Roets noted almost half of all consumers were three months or more behind in their repayments, with the major culprits being credit and store cards, followed closely by unsecured debt.

“The reality that consumers are using credit to buy food is a dangerous, but a very real one. Consumers are struggling to make ends meet and are using credit in various forms to pay for their consumables, and even pay back other debt,” Roets told The Citizen.

“It is a debt spiral that they are becoming trapped in.”

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