The recent decision by the Reserve Bank to increase the repo rate by 25 basis points, bringing it to 6%, will exacerbate the financial strain on South African consumers, who collectively owe R1.4 trillion in debt.
Neil Roets, CEO of Debt Rescue, a debt counselling firm, highlighted that this increase coincides with record-high electricity tariffs and fuel prices. He emphasized the vulnerability of indebted consumers to price hikes, stating that the rising cost of borrowing will significantly impact them. Homeowners with mortgages can anticipate higher monthly repayments, and the cost of goods and services will also be affected.According to the latest figures from the Reserve Bank, total consumer debt exceeds R1.427 trillion, indicating the financial struggles faced by consumers. Roets noted that a significant portion of indebted consumers already allocate 75% of their monthly income to creditors, with over half being three or more months behind on debt repayments.
While inflation rose slightly to 4.7% year-on-year in June, remaining within the Reserve Bank's target range of 3% to 6%, concerns exist about potential increases in the coming months.
Pensioners with investments may benefit from the rate increase, but many consumers will experience financial hardship due to toll roads, rising fuel prices, and increasing food costs. Roets mentioned a growing number of indebted consumers seeking debt review as a last resort to manage their debt. Debt review offers a way for deeply indebted consumers to repay their debt in smaller installments over a longer period while receiving legal protection, preventing debt collectors from attaching their assets.
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