More financial woes await South Africans as Reserve Bank to decide on interest rate

South Africans may have to tighten their finance belts even more as experts expect the worst from the South African Reserve Bank’s monetary policy committee meeting this month to asses interest rates.

North-West University Business School lecturer Piet Croucamp said it was getting harder for the poor, unemployed and the working class to cut costs and save money.

“They usually spend 60% of income on transport and 30% on food.

“The space to cut is already limited and the options to cut are at a minimum,” he said.

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Croucamp added that poorer people were more dependent on certain foods, which were more likely to be subject to inflation.

“Grain prices shoot through the roof,” he said.

Croucamp said the middle class would also feel the effects of inflation and suggested that consumers start cutting back on debt.

“Make sure your loans and debts are paid off and do not use your credit cards,” he advised.

He said middle-class consumers who have their own transportation could start driving less and drive more efficiently to help cut costs.

“They can change where they buy in terms of food and eat out less and go to less places to cut costs,” Croucamp said.

The Democratic Alliance’s Makashule Gana said there was no doubt that the cost of living has gone up, which had an impact on household spending.

“The price of the basket of goods has shot up, especially on basics like cooking.

“This has both an economic and health impact on the population,” he said.

Gana added that rising oil prices impacted both food and transport costs.

“This affects poor people the most as they spend most of their meagre income on food and transport,” he said.

Economist Dawie Roodt said consumers usually cut insurance and medical aid first in order to keep up with the effects of inflation.

“They also cut where they know they can get away with it, like skipping rent or school fees because they know it is difficult to be evicted and the schools won’t easily kick children out,” he said.

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Roodt added that people also cut their donations and tithes to churches. Roodt said some people would be affected positively if the repo rate was increased by the committee.

The elderly, who depend on a fixed income, could look forward to a slight increase with a higher interest rate.

“People in debt are affected most, which often leads to homeowners not being able to pay their bonds.

“If you have debt, your cash flow is further restricted,” he said.

“The increase in the interest rate may be bad for short-term economic growth, but inflation is a bigger threat to the country’s economy than that,” Roodt added.