Life is becoming simply too expensive for most consumers and they have to turn to more debt to be able to afford basic necessities.
Consumers now have to opt for payday loans to afford electricity and fuel and make provision for other inflationary pressures. In a recent survey, 53% of people who applied for debt counselling had these one-month loans.
Inflation has eased but remains at the upper end of the central bank’s range and continues to constrain consumer finances, Sager says. “Since 2016, electricity tariffs increased by 2.35 times, the petrol price has doubled and the compounded impact of inflation is 46%, with all three indicators putting additional pressure on South Africans.”While there are indications that the interest rates may finally start to tick down, they have been consistently high for over a year.
However, Sager says it is not all bad news. The median debt-to-annual-income ratio is stable and has been low for the last four quarters. While still high at 105%, it is much lower than levels seen in the past few years. Had significantly less purchasing power: Since 2016 nominal income increased marginally by 2% but the cumulative impact of inflation is 46%. This means that today’s pay packet buys 44% less than eight years ago.
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