South African consumers are in trouble

South Africa’s high cost of living has pushed many consumers to turn to credit to cover their basic necessities, which is a major concern.

This is feedback from Debt Rescue’s Annenaline van der Poel, who told Newzroom Afrika that average South African consumers are facing an “onslaught from all directions”.

Consumers are not only battling high inflation and high interest rates but also facing electricity and fuel price hikes.

The latest inflation print saw CPI at 5.6%, and the inflation rate has been above 5% since September last year.

Van der Poel said this increases the price of basic goods and services, affecting South African consumers’ cost of living.

The country’s high inflation has seen the South African Reserve Bank hike interest rates to a 14-year high, with the repo rate currently at 8.25%.

This means many South African consumers are paying far more on their mortgages and other loans than they did just two years ago.

In addition, South Africans have seen both the price of fuel and electricity skyrocket this year.

Consumers have seen two consecutive fuel price hikes in February and March, with another expected in April.

Eskom also implemented a massive 12.74% price hike on its electricity at the start of April, meaning the price of electricity has risen by 33.8% in the last two years.

“It’s just coming from all angles and affecting affordability,” Van der Poel said. “It’s affecting people’s ability to put food on the table without looking at credit. It’s very, very dire out there.”

She said this high cost of living has also changed consumers’ spending habits, which Debt Rescue has been monitoring since before the festive season.

“For the festive season, consumers already indicated dramatic changes in budget, in habits of spending, etc,” she said. 

Now, consumers are still spending on their household goods and necessities, but many are turning to credit to do so. 

“That is a big concern. If we’re turning to using credit cards, store cards, payday loans, and the likes to put food on the table and buy necessities, that’s a definite change, but it’s not a good change,” she said.

Recent data from The Outlier recently revealed that a third of the people in South Africa with credit are struggling to repay their debts. 

This means 10 million people are three months or more behind in debt repayments or facing legal action and adverse listings, according to Credit Bureau Monitor data for September 2023. 

However, the Outlier notes that part of the increase is due to many more people in South Africa having access to credit today than they did 16 years ago. 

The National Credit Regulator’s consumer credit market report revealed that South Africans are R2.3 trillion in debt. 

This debt consists of mortgages, secured credit, furniture and motor accounts, credit facilities, and other debt like unsecured and short-term loans.

Despite so many South Africans being unable to repay their loans, the appetite for credit is still very high, according to The Outlier.

The National Credit Regulator revealed that there were 15.5 million applications for credit between July and September 2023.