Major Petrol Price Hike Could Cripple South Africa’s Economy says Expert

Sourced from the South African

The major fuel price hike scheduled for tomorrow (3 June) is going to further hurt the economy and have a major impact on deeply indebted consumers. This is after the petrol price in the country slumped to a 21-year low as South Africa descended into a nationwide lockdown.

All grades of petrol will spike at R1.18 ($0.07) a litre while diesel will increase by R0.22 ($0.013) a litre.

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Neil Roets, CEO of one of the largest debt counselling companies in South Africa, Debt Rescue, says the increases would have a devastating impact on consumers who are mostly three months or more behind in the repayments of their loans.

“This is going to lead to further unemployment and to more consumers piling up more debt. While we fully understand that this is outside the control of the government, it is nonetheless going to slow down any hopes of a revival of South Africa’s economy battered by the COVID-19 shutdown.”

Roets says there had been a dramatic increase in clients on the verge of bankruptcy seeking help from debt counsellors.

“We have seen a double-digit increase in the number of clients coming to us to have us place them under debt review. We expect this increase to continue for the rest of this year and possibly even to spill into next year.”

With the publication in the Government Gazette of the latest lockdown regulations government has reaffirmed its commitment to the process of debt counselling to assist the millions of deeply indebted consumers to get back on their feet.

Roets says the combination of an expected multibillion-rand revenue collection shortfall and the COVID-19 economic meltdown spells trouble for the state’s ability to sustain society and should be seen as a ticking time bomb that could lead to widespread social unrest.

“The unemployment rate could go as high as a record of 50%. This means a smaller tax pool and less revenue for the government to spend on development and social programmes such as education, health and social grants,” he says.

Roets believes it is imperative to get the economy back to work – albeit in a safe and healthy environment.

“We fully understand and agree that social distancing has to be maintained and even tightened to save lives but there is no sugar-coating the fact that consumers are heading for disaster.”

Roets says any hopes of additional financial assistance from either the state or the private sector was a pipe-dream.

“Aside from the relief offered by the Unemployment Insurance Fund (UIF) to workers who have not been paid or not been paid in full, there are no such packages in the pipeline. At the very most financial institutions may give consumers in good standing a longer payment period in which to settle their debts,” Roets says.

“We are lucky in one respect and that is that we have some of the most progressive legislation in the world to help consumers recover from this disaster.”

He says the process of debt counselling that was introduced more than a decade ago made it possible for companies such as Debt Rescue to negotiate with creditors to obtain a longer repayment period with smaller repayments without losing assets like homes and motor vehicles.

“South Africa has the best legislation of this kind in the world and is the only country that allows home loans to be included under debt review.

He says it is vitally important that consumers use whatever spare cash they have to pay off high-interest-bearing loans as well as credit and store cards as soon as possible.

“With gross consumer debt at around R2.8-trillion (2018/19 Stats SA), it is clear that South Africans are in for a very rough ride,” Roets says.

A recent World Bank index has also shown that South Africa is one of the most indebted countries in the world.

Edited by Luis Monzon
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