Unemployment will increase
The 0.7% economic contraction during the first quarter of the year means there is no hope of creating enough jobs to halt the unemployment rate, which is currently at a 13-year high of 27.7%. Companies are also likely to face more rounds of retrenchments as they scramble to streamline their expenses to keep their businesses alive.
Salaries will not increase in line with inflation
Most salary-earners bargain on the fact that their monthly income will increase to match inflation each year. In a recession, this is not the case.
Basic household expenses will go up
At the same time, our currency will lose value, which means the price of basic household good will increase. The first price hikes will affect petrol and diesel, which has a knock-on effect throughout the supply chain. Most goods are transported on the roads, which means the price of food and other essentials necessarily go up as well.
In short, South African consumers need to tighten the belt. This is not the time to take on any more debt. If you were planning to buy a house this year, it’s recommended that you put off those plans until the economy has stabilised somewhat and there is more certainty regarding interest rates. If you are currently already under financial pressure and unable to pay all of your creditors each month, it’s imperative that you address the situation immediately.
South Africa has one of the best National Credit Acts in the world. It was put in place to safeguard you, as the consumer. Debt review is not a slap on a wrist, it’s a helping hand. Debt counsellors are trained in negotiating with creditors and are able to help you tailor a workable payment plan to keep your head above water while you square away your debt.