Latest news with #NeilRoets
The Citizen
4 days ago
- Business
- The Citizen
Survey shows how economic distress erodes South Africans' savings culture
Consumers find it difficult to stick to a savings culture while the economy causes so much financial distress. Concerning insights from the latest Debt Rescue consumer savings survey highlight a severe disconnect between South Africans' desire to save and their inability to. This is in no small part due to South Africa's struggling economy and its impact on consumers, painting a grim picture of a nation living from month to month and on the brink of financial ruin. Neil Roets, CEO of Debt Rescue, says with the majority of consumers now barely even able to live from pay cheque to pay cheque and many relying on freelance or seasonal work, savings are becoming a luxury most South Africans can no longer afford. He emphasises that they need urgent, practical financial support to help households build financial resilience in an increasingly unaffordable economic climate. 'At least two-thirds of our respondents say that despite prioritising saving every month, they are finding it close to impossible to do so now, due to financial hardship and challenges resulting from the country's economic downturn.' ALSO READ: Ordinary South Africans will feel impact of US tariffs Survey shows consumers are trying to continue savings culture Key insights from the survey, which coincides with National Savings Month in July, show that South Africans are desperately trying to secure their future finances and shield their families from even greater economic duress, but are failing miserably due to immediate basic needs barely being met. A total of 48% of respondents report that they cannot cover basic essentials like food, energy, housing and healthcare, while another 41% say they only just manage their essential day-to-day living costs. Roets points out that there is clearly no lack of will on the part of consumers. 'While it is encouraging that 87% of respondents are actively trying to improve their saving habits, the resolve to save is simply not enough in the face of serious financial strain.' He says the unsustainably high cost of living is the primary barrier, with nearly half of those polled (47%) citing the high cost of living as their main barrier to saving, while 27% attribute unexpected expenses such as medical bills as the primary reason they fail. ALSO READ: Latest petrol price increase puts SA consumers on backfoot again This is how savings culture is failing in SA Some of the stand-out insights from the survey are: 35% of respondents prioritise building an emergency fund as their most important savings goal, highlighting how many are conscious of the reality that they might be living one crisis away from financial collapse. Almost a third (27%) do not save any of their income, while 29% save less than 5%. Only 18% manage to save more than 10% of their income monthly. Saving behaviours are worsening: 26% of people polled say they save less now than they did a year ago, while 23% say they stopped saving altogether. Only 20% managed to increase their savings. ALSO READ: Are you a young professional? Here's how to avoid the debt trap Beware: hope is not a strategy – avoid online gambling to save your financial problems On the back of the financial travails that plague millions of South African households, a mammoth new social ill has reared its ugly head and is far bigger than most people realise, Roets says. Online gambling increased by 550% in only four years with no sign of a reprieve, reaching a turnover of R1.14-trillion in the 2023/24 year, or nearly 17% of GDP. The best available research shows that it is mainly low-income South Africans who gamble away an astonishing share of their monthly pay, out of sheer desperation, undoubtedly hoping for big winnings that will somehow transform their circumstances. 'Meanwhile, the national consumer debt crisis is deepening with the latest figures showing that the debt to disposable income ratio for South African households has increased to a current level of around 75%, which is higher than the long-term average of 70% according to the South African Reserve Bank (Sarb). 'What all of this points to is that, while South Africans want to save, they simply do not have the means to do so and are relying more and more on credit, the state and/or turning to risky behaviours like gambling to manage everyday living costs. 'Consumers have already started to downgrade their lifestyle costs or cut them out completely, and this is very concerning in areas such as insurance, which places them in a vulnerable situation.'
The Citizen
25-06-2025
- Business
- The Citizen
Disturbing survey reveals borrowing now a lifeline in SA
Two-thirds of South Africa's credit-worthy consumers who took part in a Debt Rescue survey stated that they cannot repay their debt. Disturbing results from a new survey of credit-worthy consumers show that borrowing has now become a lifeline for many South Africans as they become unable to repay their debts due to macroeconomic pressures beyond their control. Neil Roets, CEO of Debt Rescue, says that disturbing insights from the survey show that 41% of respondents indicated they defaulted on their credit cards over the past year, while 30% missed payments on retail store accounts. 'Credit cards and store accounts are the two most commonly used forms of credit for day-to-day expenses because they are existing facilities consumers have access to. They are now becoming increasingly unaffordable while providing the only lifeline for many consumers.' In addition, the survey outcomes show that 24% of people polled also defaulted on their personal loans, with 31% of respondents attributing this to unexpected expenses and 21% to loss of employment. ALSO READ: Most South Africans use personal loans to make ends meet 50% of respondents cannot afford necessities Roets says underlying this escalating debt crisis is the inability of half of the respondents (50%) to afford basic necessities such as food, electricity, or fuel due to a lack of available funds, with a full 50% saying they had to turn to credit to buy food, electricity, or fuel in the past 12 months. 'This points to the widespread financial distress many South African households find themselves in, due to economic pressures which have seen living costs skyrocket over the past few years while there has been very little in the way of financial relief in terms of interest rates, cost of living and tax reductions. '65% of the respondents said current economic conditions are significantly affecting their ability to repay debt,' he adds. South African consumers are drowning in debt with no easy way out and the new Eighty20 XDS Credit Stress Report for the first quarter of 2025 confirms this, showing that middle- to high-income earners are feeling the pinch as well. ALSO READ: This is how SA consumer class is cutting costs South Africans unable to repay loans even after borrowing more Statistics from the report paint a grim picture, with figures showing the alarming increase of R130 billion (5.3%) in loan balances from 2024 to 2025 and an increase of R25 billion (13.7%) on overdue loan repayments. This extends to home loans with overdue payments up by 21.5%, while there has also been an alarming surge in credit card debt which is up by 8.7% from 2024 and of the 350 000 new credit users, 53% have already missed payments. 'These numbers reflect the reality of life right now for millions of South Africans who are unable to keep up with paying their rent, car payments, groceries and school fees, while they are defaulting on all sources of debt and credit. This is not a case of overspending on luxuries but simply a means to financially get by,' Roets warns. He has been sounding the alarm for well over a year now. He says the elephant in the room is, of course, the many millions more who do not qualify for credit and are hanging on by a very thin thread, with the latest statistics showing that 25% of the population now live below the food poverty line according to the World Bank and over 30 million people living below the upper-bound poverty line of approximately R1 634 per month. ALSO READ: What does the future hold for the youth? Most 24-year-olds in debt 62% of South Africans living in poverty According to ISS Africa, figures for South Africans living in poverty have hovered around 62% in recent years, and on the current growth trajectory, this is set to inch down marginally to 60% over the next decade. Roets says this is largely the result of escalating food, energy, water and fuel costs, driven by an economy in deep trouble, which has led to the current unsustainable unemployment level of 32.9% of the population. 'It is only possible to reduce unemployment with a rapidly growing economy and the figures showing economic growth of just 0.1% in the first quarter of 2025 fail to inspire much hope. 'While 27% of people polled by Debt Rescue said they are compelled to take on part-time jobs or freelance work to increase their income – simply to meet the monthly needs of their families and themselves, many are simply unable to extend their working hours to accommodate earning an extra income and taking on debt becomes the only other alternative.'
The Citizen
29-05-2025
- Business
- The Citizen
Repo rate cut offers no shelter from Budget 3.0 fallout for consumers
Thursday's repo rate cut is unlikely to bring much relief to cash-strapped consumers, as any savings will be offset by the rising fuel levy eating into their income. Although the Reserve Bank's decision to cut the repo rate by 25 basis points on Thursday is good news for economists, it will not shield South Africans from the burden of the fuel and sin tax levies introduced by Budget 3.0. Neil Roets, CEO of Debt Rescue, warns that increased taxing of the workforce is not the answer and will put further financial strain on households, driving them to new depths of despair at a time when they are buckling under the weight of multiple unsustainable inflation-related living costs. 'The reality is that the finance minister's decision to impose new tax measures will hurt lower-income families most, as they will bear a proportionally higher burden, forcing them to make impossible lifestyle choices with the little disposable income they have left.' Before the South African Reserve Bank (Sarb) governor, Lesetja Kganyago, announced the repo rate cut this afternoon, economists polled by Reuters accurately predicted that the Bank would restart its repo rate cutting cycle this month, trimming the repo rate by 25 basis points to bring down the interest rate to 7.25% as the latest inflation data strengthens the case for monetary easing. ALSO READ: Reserve Bank cuts repo rate thanks to lower inflation, stronger rand Repo rate cut too small to matter for consumers 'While any cut in the repo rate benefits consumers, the change is simply not big enough to make any real difference in their lives, or to encourage growth in the economy. The impact on consumers will be minimal, as the 25 basis points cut will mean a tiny saving of R254 per month on a R1.5 million home loan and around R65 on a R500 000 car loan. 'Ultimately, a growing economy is the only solution that will slowly lift the weight of unsustainably high living costs from the shoulders of South Africans,' Roets says. Inflation currently remains outside the Sarb's target range of 3% to 6%, with the most recent data showing that consumer inflation was 2.8% in April, just slightly above March's 2.7%. However, Roets points out, inflation on food and non-alcoholic beverages was 4.0%, the highest it has been since September 2024. 'Overall, inflation is still considered low, which would have been a strong incentive to cut the current repo rate. The exchange rate of the rand also remains a key factor in economic stability and would have influenced the MPC's decision.' ALSO READ: Reserve Bank could cut repo rate on Thursday, but will it decide to? Move to lower inflation target will affect repo rate Kganyago is a longstanding advocate of shifting to a lower inflation target, arguing this would ensure South Africa is better placed to compete with its trading partners. He said earlier that a single-point target of 3% would be in line with South Africa's peers and lead to lower interest rates in the long term. However, his critics worry that reaching a lower inflation target will require tighter monetary policy that will impede growth and employment in a country with one of the highest jobless and poverty rates in the world. On Thursday, Kganyago reiterated his view, saying that the Monetary Policy Committee (MPC) believes that the 3% scenario is more attractive than the 4.5% baseline and would like to see inflation expectations move lower, towards the bottom end of their target range. He also said the MPC will consider scenarios with a 3% objective at future meetings. However, Annabel Bishop, chief economist at Investec, warns that a lower inflation target risks scuppering further interest rate cuts this year too. 'With a change to the inflation target reportedly occurring soon this year, the Sarb has chosen to cut interest rates this month to avoid the limitation of doing so in the future but then could easily be at risk of needing to reverse the cut.' ALSO READ: Salaries decreased by 2% in April, but higher than a year ago Slow pace of repo rate cuts perpetuates debt trap Roets says the reality is that the slow pace of the country's repo rate reductions is perpetuating the debt trap that millions of ordinary South Africans find themselves in, leaving millions with no option but to survive on credit. 'This scenario has been escalating since the prolonged tightening cycle began towards the end of 2021, when the MPC raised the repo rate by a cumulative 4.75% between November 2021 and May 2023, taking it from 3.50% to 8.25%, the highest level since 2014. ' Against this backdrop, the latest Statistics SA General Household Survey, released on Tuesday this week, reveals shocking statistics about hunger in the country. According to the survey results, almost a quarter of South African households did not have enough food to eat last year. This means that around 14 million people out of South Africa's population of 63 million went hungry. Of those polled, 22.2% of households considered access to food inadequate or severely inadequate. 'South Africans need real financial relief. This is a glaring red flag that should be at the top of the list of concerns for government. Sadly, this means more and more South Africans are relying on their credit and store cards to put food on the table and keep the lights on. 'The likelihood is that they will default on debt and fall into an even deeper trap, as the cost of credit increases due to existing debt. This is most evident with big purchases like home and car loans.'
IOL News
13-05-2025
- Business
- IOL News
Experts remain divided on potential interest rate cut as consumer inflation falls to 2. 7%
Economists and debt experts have mixed feelings if there will be an interest rate cut later this month when the Monetary Policy Committee (MPC) is expected to make its decision on interest rates. As South African households continue to grapple with relentless financial pressure, the upcoming Monetary Policy Committee (MPC) meeting has sparked intense debate on whether the South African Reserve Bank (Sarb) will implement an interest rate cut. With inflation plummeting to 2.7% in March—its lowest point since 2020—economists and debt experts find themselves at a crossroads, oscillating between cautious optimism and prudent scepticism. Neil Roets, CEO of Debt Rescue, on Monday acknowledged the necessity for an open dialogue regarding possible interest rate reductions. 'While we welcome the conversation—and any form of relief—we remain deeply concerned about the unrelenting financial pressure facing South African consumers,' he said. Roets highlighted the paradox of low inflation against the backdrop of a soaring repo rate, which stands at 7.5%. In his view, even if the Sarb were to enact a reduction of 25 or 50 basis points, it would barely alleviate the ongoing cost-of-living crisis experienced across the nation. He said consumers were buckling under the weight of rising food prices, yet another electricity price hike in April, and unaffordable debt repayments. 'Our April 2025 survey confirmed that more South Africans are relying on short-term credit just to survive. The need for relief is urgent. While we understand the Sarb's cautious, data-dependent approach—especially amid global uncertainty—this cannot come at the expense of people's basic survival,' he said. Roets added that monetary policy alone won't fix everything, but decisive action would help ease the debt burden and inject desperately needed confidence back into the economy. Benay Sager, executive head of DebtBusters, expressed optimism about the conditions that might permit a rate cut. However, he shares a belief that the Sarb will ultimately opt for caution, likely maintaining the current rate. 'If the interest rate does change downwards, it will be good for consumers as it will allow a bit more breathing room. If it stays the same, our recommendation to consumers would be to continue servicing their debt and payments, and to continue to look for ways to stretch their money as much as possible,' he said. 'If it stays the same, we think it would be driven mostly by global macroeconomic situations, as opposed to anything happening locally in South Africa.' Despite mixed sentiments, some analysts are holding out hope for a relief measure. Economist Casey Sprake from Anchor Capital said that falling oil prices—thanks to OPEC increasing production—could trigger a 25 basis point interest rate cut in the imminent MPC meeting. 'While the next move by the cartel remains difficult to predict, the current lower oil price environment is clearly beneficial for South Africa. Given oil's significant weighting in the inflation basket, we expect headline inflation to remain subdued in the near term, providing some breathing room for monetary policy,' Sprake said. 'As a result, we anticipate a 25 basis point interest rate cut at the upcoming Monetary Policy Committee (MPC) meeting in late May, followed by an additional cut at the subsequent meeting. However, from July onwards, we expect inflation to begin edging higher again, largely due to base effects.' Sprake said the potential for more aggressive easing by major central banks, particularly the US Federal Reserve and the European Central Bank, increased the likelihood that South Africa may be compelled to follow suit—especially in a scenario of weakening global growth and heightened capital flow volatility. 'Should this unfold, it would raise the probability of a deeper and earlier rate-cutting cycle from the Sarb,' she said Visit:
IOL News
11-05-2025
- Business
- IOL News
Will the fuel cut really make a difference in the lives of SA consumers?
Food basket. The past few months have been among the toughest yet for citizens from all walks of life and the tiny petrol price cut announced by the DMRE will make no discernible difference in the lives of consumers who are still facing prices above R20,00 per litre at the pumps. Image: Independent Newspapers The pain continues for millions of South Africans who have battled their way through the past year, despite the cost-of-living crisis that has all but decimated household budgets across income groups, with no easing up of their financial burden on any front whatsoever. 'The past few months have been among the toughest yet for citizens from all walks of life and the tiny petrol price cut announced by the Department of Petroleum and Mineral Resources (DMRE) this week will make no discernible difference in the lives of consumers who are still facing prices above R20,00 per litre at the pumps. In addition, rocketing food prices and unsustainably high interest rates keep them locked into a debt cycle that they cannot escape,' CEO of Debt Rescue Neil Roets said. This past week the DMRE published the official fuel price adjustments that took effect on Wednesday, 7 May, announcing a cut in the price of petrol of 22 cents per litre for 93 and 95 petrol, respectively and between 41 and 42 cents per litre for diesel. This was largely due to steep declines in global oil prices in April as markets got rattled by US President Donald Trump's tariffs and trade wars, while the rand weakened slightly amid the shocks. The average Brent crude oil price declined from $71.04 to $66.40 over the month, and the average international product prices for petrol, diesel and illuminated paraffin decreased during the period under review. 'While any financial relief is obviously welcome, authorities need to recognise that South Africans are at breaking point right now under the combined onslaught of food prices that have increased far above the inflation rate, interest rates that are still among the highest they have been in a decade and the relentless financial onslaught from Eskom for an essential service that impacts the survival of every man, woman and child,' Roets told Business Report. The price of food is unsurprisingly at the top of the list of concerns for the majority of households across the nation, not least because recent price increases for basic foodstuffs now place nutritional meals out of reach, especially among lower-income families. While the latest inflation data for South Africa showed an easing, food prices in the country saw a sharp increase. The April 2025 Household Affordability Index, confirmed the daily reality facing people today: the cost of survival is rising faster than people can keep up. 'The figures in the April 2025 Household Affordability Index, released by the Pietermaritzburg Economic Justice and Dignity Group (PMBEJD) , reflect a brutal truth—millions of South Africans are no longer coping,' Roets said. Aliya Chikte, project officer at the Alternative Information and Development Centre (AIDC) said that although food inflation is slowing down, the average cost of a household food basket is unaffordable in the context of mass unemployment and deep impoverishment. The latest PMBEJD report shows that the average household food basket, catering for a family of four, now costs R5 420.30, but a nutritionally adequate food basket is priced at R6 666.26. That's a shortfall of R1 245.96, a gap that low-income households simply cannot close through income alone. This means that workers earning the National Minimum Wage are R2 000 short on food after covering just electricity and transport, leaving only R453.28 per person per month for food, far below the Food Poverty Line of R796. The effect of VAT on the household food basket is significant, with 22 of the 44 food items in the total household food basket subject to VAT. Food items subject to VAT made up 46% of the total cost of the household food basket in April. With zero-rated food items costing R2 929.32 and foods subject to VAT R2 490.97, VAT on the total household food basket amounted to R324.91. 'This means that 6.0% of the household food basket was made up of VAT. This is money that could be used to buy more food,' Roets said. "Added to this is the sad fact that hard-working taxpayers will ultimately pay for any mistakes made by the government. When the Western Cape High Court stopped the tabled VAT hike, it passed the legal costs on to Treasury and Parliament. This means that taxpayers will end up footing this bill. Exactly how much remains to be seen, but it is likely to run into hundreds of thousands of rands," Roets said. The latest BankservAfrica Take-Home Pay Index showed that nominal average take-home pay declined to 17,811 in March 2025, 2.5% lower compared to February's R18,272, due to intensifying economic headwinds both locally and globally that continue to pressure growth prospects and confidence levels. This raises concerns over potential impacts on employment and earnings in the coming months despite the upward year-on-year momentum.
