We're drowning in debt

Cash-strapped South Africans are drowning in a trillion rands' worth of debt.

More than 6.3 million people have bad credit records, according to the National Credit Regulator.

Moreover, much tougher times lie ahead this year, with rocketing fuel, food and electricity prices, and escalating municipal and interest rates, all of which have hammered bank balances.

Reserve Bank Governor Tito Mboweni this week told consumers to tighten their belts, sparking fears that interest rates would rise yet again in two weeks.

Home- and car-owners repaying loans are taking strain.

In January last year, 25139 people were issued summonses for civil debt. This ballooned to 86461 in January 2008, according to Statistics South Africa.

Food a major culprit

The biggest culprits for relentlessly pushing up grocery bills are grain products, milk, cheese, eggs, fats and oils, and fruits and vegetables, according to the National Agricultural Marketing Council's Food Price Trends report. It compared prices between January 2007 and January this year.

In that period, white bread jumped from R4.70 to R5.63, maize meal from R13.74 to R17.81, cooking oil from R7.65 to R12.70, whole chickens from R22.32/kg to R26.16/kg and full cream milk from R4.60 a litre to R6.31 a litre.

South African consumers are not alone when it comes to the punishing cost of buying food. The United Nations Food and Agriculture Organisation has warned that consumers worldwide face at least 10 years of high food prices driven by freak weather, high oil prices, dwindling food reserves and massive demand for meat and dairy products from China and India.

Notices of sales in execution in South Africa shot up 50% last year, and Auction Group CEO Rael Levitt said he expected the number to grow another 75% by the end of 2008.

“The global credit crisis is coming soon to a street near you,” said Levitt.

“It's like the ‘On' button for liquidations has been switched.”

He said there was also a possibility of declining house prices in the R2-million to R5 million segment of the property market.

Vehicle sales set to fall again

Eskom has applied for an electricity price increase of 53% or even 60%. If approved, it will come into effect later this year, but may be backdated to April.

Monthly repayments on a R1-million mortgage bond at prime increased from R11360 in January 2007 to R12800 last month as the prime interest rate offered by banks hit 14.5%.

Car sales, which dropped 9.9% last year, are projected to drop a further 8% this year, according to the National Association of Automobile Manufacturers of South Africa.

The petrol price is projected to finish the year at a staggering R9.20 a litre, according to Peter Morgan, chief executive of the Fuel Retailers' Association.

This month, the price of unleaded petrol went up 61c, to R8.25 a litre in Gauteng, and R8.01 a litre at the coast.

This time last year unleaded petrol cost R5.99 a litre in Gauteng and R5.75 at the coast.

The retail price of petrol will increase by between 67 cents a litre on at midnight tonight, the Department of Minerals and Energy announced on Friday.

New fares not for the faint-hearted

Bus and taxi fares will join the upward trend, but commuter train fares will not increase. Metrorail fares last increased in 2003 and would remain at current levels until service improved, said communications manager Riana Scott.

Cape Town's Golden Arrow Bus Services is preparing a submission to the Department of Transport. Corporate development manager John Dammert said it was difficult to speculate on the size of the increase.

In Gauteng, Metrobus's annual increase in July is expected to be higher than usual, a representative said.

The South African National Taxi Council said prices had increased on average by R1 per journey this month.

Gauteng residents are squirming under the prospect of new municipal property rates, due to be implemented in July. The new system has already seen property rates jump in Cape Town and the same is in store for Durban.

Increased school fees added to the woes of many parents at the start of this year — for example, Jeppe High School for Boys in Johannesburg increased 12.6%, Alexander Road High School in Port Elizabeth 9.5%, and Wynberg Boys' School in Cape Town 13,6%.

Some good news

However, the good news is that clothing prices appear to be stable ahead of what could be a bleak run-up to winter with electricity blackouts confirmed for the next three months, starting tomorrow.

Woolworths and the Edcon group said they would take action to manage prices and implement other cost-cutting measures before passing more expenses onto customers.

The rising cost of living is having an effect on the national psyche. Rhodes University psychology lecturer Mike Routledge said hearing about negative issues such as higher interest rates, fuel and food price increases — and living through them every day — created a sense of despondency.

“These issues might exacerbate the situation for those people who are thinking about emigration,” he said.

“They could use the situation to rationalise leaving.”

Source: Sunday Times

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