Around 69% of South Africans say they cannot pay their bills on time every month due to steep increases in the cost of living over the past two years.
This was revealed in a survey conducted by Debt Rescue during December, with the company only expecting this to get worse as South Africans probably took on more debt over the festive season.
Debt Rescue COO Anneline van der Poel told Newzroom Afrika that rising inflation and interest rates put consumers under severe financial pressure in 2023, which is unlikely to ease in 2024.
A decrease in inflation does not mean that prices are coming down. Rather, it means that prices are increasing at a slower rate, she explained.
Furthermore, it is unlikely that the slowing of inflation will be sustained as geopolitical tension and conflicts in the Middle East will keep it elevated.
In particular, the prices of fuel and, thus, food will remain elevated and are likely to continue to rise as global oil supplies come under pressure from disruptions to shipping in the Red Sea.
While there will be some relief from declining fuel prices in January, this will not substantially reduce the financial burden many South Africans bear in 2024.
Van der Poel explained that interest rates will likely remain elevated after steep increases in 2022 and 2023, meaning debt payments will largely take up consumers’ disposable income.
This is compounded by years of poor salary increases and companies either retrenching employees or not hiring to deal with rising costs anymore.
The latest stats show that disposable income declined by 2.9% in the third quarter of 2023 while inflation continued to outpace wage and salary increases.
This is in comparison to the cost of servicing debt increasing at the same time, consuming 8.9% of disposable income, up from 8.8% in the second quarter.
“Consumers are not in a better position at the start of 2024 at all,” she said. “It is going to be another tough year. We are definitely not out of the woods.”
The 2023 NIQ Consumer Outlook Report for South Africa revealed that consumers are feeling the majority of local consumers are experiencing the adverse effects of the current financial climate.
A massive 70% of those surveyed already feel they are living in a recession, while 76% said the increased cost of living was to blame for their financial struggles.