National disaster coming for middle class – Here’s how to avoid being pushed over poverty line

South Africa’s middle class is the group most in danger of being pushed over the poverty line due to the impact of frightening cost of living increases.

Middle-income consumers spend up to 80% of their monthly salary within five days, and an average of 30% of their income goes toward unsecured credit and 35% on secured credit.

The food poverty line is now at R624, which is the minimum amount of money a South African needs per month to afford food that supplies the minimum required daily energy intake of 8 820 kJ, according to Statistics South Africa.

According to Neil Roets, CEO of Debt Rescue, the latest Debt Rescue survey supports these figures, with 40% of participants indicating that they have too much debt to cope with, while 40% have impaired credit records.

“With the volley of living cost increases that just keep hitting middle class South Africans from all sides, they can no longer cover their basic costs. It is this consumer who turns to credit to see them through,” he warns.

This is a very precarious position for consumers and the country, and the repercussions will soon be felt as consumers head for a tighter money crunch, as a perfect storm is stirred up by increasing interest rates, rising inflation and steeper fuel prices.

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Beginning of a national disaster for middle class

Roets says all factors point to this as the beginning of a national disaster as countries around the world rely on the middle class to stay afloat.

“The danger lies in the possibility of the bulk of South Africa’s middle class being pushed below the poverty line.”

Statistics SA’s latest consumer price index shows that inflation is going through the roof, with annual consumer price inflation lurching to 6,5% in May this year, from 5,9% in April and March, breaking through the upper limit of the South African Reserve Bank’s monetary policy target range.

“This is the highest reading since January 2017 when the rate was 6,6% and it is no surprise that fuel in particular is a major contributor. In fact, the impact of fuel is so great that removing it would see the headline rate fall from 6,5% to 5,1%.”

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This is what the middle class can do

Roets says there is no point in advising consumers to assume the brace position and buckle up, because they have done that already and still cannot make ends meet.

“What people need now is solid and constructive advice on how to cope.”

His advice to consumers in the middle and lower-income groups is to take a careful look at their monthly budgets and see where you can cut costs by being extra vigilant, as every cent counts by this stage and can make the difference to living above or below the poverty line in the coming months.

Save on electricity

The electricity bill is a sizeable expenditure for most households and small adjustments can make a big difference. 

Replace light bulbs with energy efficient ones, invest in a geyser blanket to retain the heat and prevent the geyser from heating up so frequently, review the thermostat temperature, and look at investing in a timer to ensure the geyser only heats up when in use.

Groceries

Consumers can also save by adjusting their shopping habits. 

Something as simple as planning each shopping trip can make a big difference. Make a list of what you need before you go to the mall or the store to ensure you remember what to buy and do not buy goods you already have.

Check the community newspapers for specials on offer and centralize your shopping to avoid driving up and down and wasting fuel. Remember to use your loyalty cards and coupons to add to how much you save.

Plant a Garden

If you have some space, plant hardy, easy to grow vegetables such as spinach, tomatoes and green peppers, or start a community garden where everyone grows something different and swop out your produce when you harvest, to save on your food bill.

Look after your credit record

“Looking after your credit record is one more important area where taking charge can make a big difference,” Roets says. 

“Your credit record affects how much you can borrow and what interest rate you pay. When you are overindebted and you are paying off accumulated interest, the lower the better.”

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Debt Rescue has seen a year-on-year increase in the number of South Africans seeking debt relief and Roets says there is little doubt that this number will increase sharply in the next few months.