As the year comes to an end, disappointed consumers are wondering what happened to their financial optimism at the beginning of the year.
Although there will be relief at the pumps this week, it does not spell a jolly festive season and Christmas for South Africans because it will not do much about their dire financial circumstances, where the gap between what people need and what they can afford is constantly widening.
The Department of Petroleum and Mineral Resources made the welcome announcement of another price cut at the pumps due to kick in on Wednesday, bringing some small relief to motorists in the form of a 51 cents per litre cut in 95 and 93 unleaded petrol and a 21 cents per litre decrease for diesel vehicle drivers.
This means motorists will now pay R20.97 per litre for 93 unleaded at the pumps and R21.12 per litre for 95 unleaded, while diesel prices drop to R19.13 per litre.
This decline in price has been driven by steadily weakening international oil prices over the past month, despite fresh sanctions on Russia’s two largest oil companies and a wave of renewed tension between the US and China, Neil Roets, CEO of Debt Rescue, says.
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Relief at the petrol pumps not enough to make a real difference
“Sadly, this relief is simply not enough of a boost for consumers’ budgets to make any real difference in their lives. South Africans are trapped in a relentless cost-of-living price increase cycle, and our coffers are empty as we head towards December.
“While high electricity and food prices continue to decimate household budgets, the cost of fuel affects the holiday travel plans of households significantly. The impact of the still high petrol price is that millions of people will have to sacrifice their annual trip to visit their families over the festive season and stay at home this year.
“If the current trend of escalating prices for essential goods and services continues, the gap between the cost of necessities and what the average South African household can afford will continue to widen until the majority of the country’s citizens are living below the poverty line,” Roets warns.
According to the Pietermaritzburg Economic Justice and Dignity Group’s latest Household Affordability Index, 30.4 million people (55.5% of the population) currently live below the upper bound poverty line of R1 634.00 per month in South Africa.
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High unemployment and lots of debt means no money for Christmas
In addition, South Africa is still grappling with a severe unemployment crisis. Statistics SA’s Quarterly Labour Force Survey for the second quarter of this year recorded 140 000 more workers losing their jobs, with the official unemployment rate ticking up to 33.2%.
The South African Reserve Bank (Sarb) has warned that the ongoing US tariffs on local exports and the end of the African Growth and Opportunity Act (Agoa) will eat away at already low economic growth and cost thousands of jobs.
Roets points out that this is something the country’s citizens can ill afford, especially now. He emphasises the toll this is taking on the youth, especially, who are the hardest hit by lack of employment opportunities.
“This is the generation who are expected to lead the nation into the future. How will they do this if they themselves are unable to gain work experience and develop their leadership skills?”
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The toll of gambling on consumer finances
Roets also warns about the toll of gambling on consumers’ finances. “Unsurprisingly, given the state of consumers’ financial predicaments, there has been a significant growth in the amount of money South Africans spend on betting over the past few years.
“In the past year, around R1,5-trillion was spent on gambling, representing about 65% of South African’s total outstanding debt.”
The Experian Consumer Default Index (CDI) measures people defaulting on their debt repayments for the first time, which is a leading indicator of financial distress. With access to 55 million consumer records, Experian has deep insights into spending patterns and levels of financial distress in South Africa. Experian found that the rate of increase in defaults is significantly higher among those who gamble compared to those who do not.
A new study by Experian and Vault22 concludes that gambling is one of the pertinent factors causing financial distress among South Africans. Jaco van Jaarsveldt, chief strategy and innovation officer at Experian Africa, says the study clearly shows that it is the younger segment of the market that spends a larger share of their monthly income on gambling and ends up in financial distress.
“It is clear from these statistics that there is a correlation between gambling activity and financial distress, and that it is our younger generations who are gambling themselves into deep trouble. This is a disturbing lens into the financial predicament of the nation right now,” Roets warns.
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No jolly Christmas for most consumers in SA
He also does not see that consumers will have a jolly festive season. “With the festive season now fast approaching and consumers battling furiously to keep their heads above water financially, in the face of the volley of price increases in essential goods and services, millions of citizens will be looking for ways to celebrate the holidays on a shoestring budget.”
He points out that with petrol prices still peaking above the R20 per litre mark, this will likely rule out long road trips for many, with families opting to stay at home and celebrate with family and friends nearby.
