Christopher Motabogi

Economists say 2013 will be a year of financial hardships for many South Africans; with one even stating that consumers themselves must shoulder some of the blame for their debt situation.  The warning follows public hearings by the National Energy Regulator of South Africa (Nersa) in Bloemfontein, to consider input into power company Eskom’s proposed 16% annual electricity hike over five years.  Eskom says it needs the money to “keep the lights on”, but agriculture, labour, Centlec and political parties are opposed to the hike; accusing Eskom of being less than honest about the “real impact” of the increase on consumers.

First National Bank Economist John Loos says the days of hoping for interest rate cuts are over and each family should take responsibility for its financial situation.  John Loos was reacting to Thursday’s Reserve Bank Monetary Policy Committee’s decision to keep rates unchanged at 5.5% and the prime lending rate at 8.5%.  “I think one must bear in mind that higher income groups are often able to service a bigger debt burden than the low income groups, whereas a high percentage of the low income groups spending have to go to a central item like food or transport, so they have less room to manoeuvre,” says Loos.

Meanwhile, Willem Boshoff of the Property House Group, who has worked in the property market for over two decades, says the perception that businesses are merely opposing Eskom’s proposal so as to make bigger profits, is unfounded.  He says the higher electricity bill was responsible for the mushrooming of businesses in various areas, who cannot afford to rent zones spaces such as in malls.  “I think all business stakeholders in the country will have to sit with government that they realise the severity and seriousness of the situation. It’s not like rich businessmen too many times are just complaining to make profits. I think we are at a point of survival… a point where the wheels can actually come off,” says Boshoff.

But according to Loos, individual families must take responsibility for their families’ debt situation, while savings for unforeseen expenses and retirement must be encouraged.  “You can have debt all your life up until the age of 60. You can pay it off reliably. At the age of 60 or 65 you’ve paid off all your debt and that’s fantastic. So the bank didn’t lend recklessly to you necessarily, but you may not have saved a cent for your retirement,” warned Loos.

He says although legislation regulating the lending of money to consumers (like the National Credit Act) may have had some impact; but ultimately the solution will come when households take responsibility for their own financial situation.