CONSUMERS will have to dig deeper into their pockets to pay for basic commodities following the SA Reserve Bank’s recent announcement of an increase in the repo rate by 25 basis points from 6.75% to 7%.
The financial implications will be hard-felt among lower and middle-income groups as they grapple with the high cost of living in the form of rising food and fuel costs, slow economic growth and the difficulties of repaying loans on time. With the prime lending rate at 10.5%, businesses too will face tough trading conditions as a weaker exchange rate and the prospect of a credit rating downgrade place them at a disadvantage with global markets.
The South African Institute of Race Relations reported that South Africans spent 25.3% of their money on food, beverages and tobacco and 18.8% on transport. Housing, water, electricity, gas, and other fuels took up 14.6% of household expenditure while education consumed 3.4%. The advice from financial services provider Ithala SOC Limited is to cut back on luxury items and other non-essentials, reduce debt and save through formal interest-bearing accounts as well as group saving schemes such as stokvels.
“The rising prime lending rate increases the pressure on consumers who will be liable for increased repayments on outstanding debts, such as home loans, vehicle finance, credit cards and personal loans, thus impinging on their ability to save” said Shane Moodley, Head of Segments at Ithala SOC Limited.
“Every penny counts and so there is a need for a radical shift in priorities and spending patterns among consumers who now have less spending power.
