By: Opinion – IOL Business Report

South Africans have been collectively waiting with bated breath for some small financial reprieve from the relentless price hikes of the past few years that have driven them to the brink of despair, chief among these being the highest interest rate the country has had to contend with in over a decade, fuelled by soaring inflation.

While many people have lost faith in the ‘system’ throwing them any kind of lifeline, hope is the reservoir we have all drawn on thus far to propel us forward - but it seems that there will be no ‘waiting to exhale’ moment any time soon.

Dispelling hopes that the South African Reserve Bank (SARB) will cut interest rates any time soon, the bank’s April 2024 monetary policy review reflects their uncertainty about when inflation will return to the central bank’s target midpoint, and with that, they remain unsure about global disinflation.

The result of this?

Market expectation is that SA’s repo rate may well remain unchanged at its 14-year high of 8.25% for the remainder of this year.

This, after earlier forecasts by the Monetary Policy Committee suggested rate cuts could start in the first or second quarter of this year.

This news has dashed the last hope of millions of South Africans who have battled their way through a volley of cost-of-living increases, following the devastating effects of the pandemic in 2020 – and consumers have long since reached the end of the line.

Desperation is the new normal

Suffice it to say that desperation has become the new normal for South African consumers.

Approximately 30 million people are currently living at or below the national upper poverty line of R1 558 per person per month, with households now facing impossible decisions such as whether to use their spending money on nutritious food or pay for transport to get to work or school.

There is yet no end in sight to the relentless price hikes for basic necessities.

According to the Household Affordability Index for April, the average cost of the household food basket increased yet again in April after stabilising in March and February.

This impacts low-income families especially, who have less money to spend on nutritious food.

Recently, the Competition Commission’s economic research unit reported that, despite lower food inflation in South Africa being a positive sign for households, food prices are still rising at a rate that may threaten food security.

While the commission conceded that there may be various reasons for this – including different levels of competition – it picked up an ongoing “rocket and feather” effect in food pricing, where shelf prices shoot up amid high inflation, but take significantly longer to come back down, even if there is a rapid decline in inflation.

Given the current scenario, why are our large food retailers not mitigating this in every which way possible?

Towards the end of March, load shedding was suspended, leaving South Africans free of power cuts since then.

Yes, this is certainly something to celebrate, and we all can breathe easier knowing that the likelihood is good that we can heat up food, take a hot bath and keep our children warm during the winter months – without the constant threat of load shedding.

For many however, this makes no difference at all to their daily lives, as the latest NERSA-approved electricity price hike implemented from 1 April onwards – a whopping 12.72% increase - has placed even this basic utility out of the reach of many millions of people.

News of the fourth consecutive hike in petrol has hit motorists and commuters very hard – leading to increases in public transport costs, that most can ill afford – and fuelling cost-push inflation that contributes to the overall inflationary pressures within the economy, potentially leading to yet another interest rate hike. Yet, most soldier on bravely, believing there will be a turning point.

The writing is on the wall

However according to consultancy Deloitte’s latest ConsumerSignals report for the first quarter of 2024, South Africans are becoming increasingly stressed out about the state of their finances and what lies ahead for the economy.

Hannah Marais, acting chief economist for Deloitte Africa, says these anxieties are expected to linger for the time being, particularly through the elections – with political uncertainty heightening in the country.

The writing is on the wall. South Africans are trapped in an economic downward cycle, driven by never-ending cost of living hikes that exacerbate their misery, with no end in sight. For some, the only solution has been to incur debt – no longer to keep up with their lifestyle needs – but simply to make it through each month, as interest on vehicle, home and personal loans gobble up much of their income.

The statistics speak for themselves

According to data aggregation company SearchWorks, the average South African consumer allocates about 62% of their take-home pay towards servicing debt.

The household debt-to-income ratio is projected to hover around an astounding 65% in 2024.

More than 8% of all home loans in SA are at risk of being declared non-performing – and more than 20% of customers are going into debt review as they look for ways to protect their assets.

The warning signs are there. We are staring down a catastrophe in the making if the plight of the majority of citizens across the country is not addressed.

After all, it is the working class South African who is keeping the wheels of the economy going, with the sweat of their labour. Right now they need a lifeline. Tomorrow may be too late.