Why the economic downgrade should inspire consumers to save more

If you are someone who keeps an eye on the news, you’ll know that the world’s foremost credit rating agencies have downgraded South Africa to sub-investment status in the wake of the president’s contentious cabinet reshuffle. While we all realise this is very bad for the South African economy, few of us actually understand how this could impact on our own finances further down the line. Here are a few reasons why the economic downgrade should inspire you to save more.

date: 07/05/2017Author:


The funny thing about this economic downgrade is that, as a consumer, you won’t start to feel the effects immediately. It will take some time to trickle down to grassroots level, but once it does, you’ll want to be ready. Here are a few unexpected ways in which it could impact on your livelihood:

There are going to be job losses

Our economy is already growing at the slowest pace it has since 2009, and official unemployment stands at 27%. Without macro-economic stability and policy certainty, industries like banking, auto repair and construction will get less work, leading to significant job losses. Furthermore, with the resultant confidence being eroded in our critical institutions and economy, lower investment will in turn mean a negative effect on job creation, which means more school-leavers will battle to find employment when they enter the job market.

Food and fuel prices will go up

If the rand goes into free fall and reaches R16 or R17 to the dollar‚ inflation will rise‚ which means food and fuel prices will rise. These are the basic building blocks of a household economy, so when these items get substantially more expensive, it can strangle your domestic budget very quickly.

Short-term insurance is going to become very expensive

Here's why: The cost of motor parts (most of which are imported) will raise drastically, which will lead to increased repair costs, which leads to higher insurance premiums. Once consumers drop these policies because they can no longer afford it, they will be exposed to enormous risk in terms of loss or damage to major assets like their homes, cars, etc.

If you are like many South African consumers who already cannot keep up with all their monthly payments, now is the time to address your debt. The country’s economic outlook is not set to improve any time soon, so take care of your finances before interest rates spike and your instalments grow even larger.

Get in touch with a Libertine Consultants representative today to discuss your options.

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