ON THE EDGE: COST OF LIVING INCREASES MAKE IT HARD TO COVER BASICS
By Ina Opperman
The middle class is the group most in danger of being pushed over the poverty line due to the impact of frightening cost of living increases
Middle-income consumers spend up to 80% of their monthly salary within five days and an average of 30% of their income on unsecured credit and 35% on secured credit.
The food poverty line is now R624, the minimum amount of money a South African needs per month to afford food that supplies the minimum required daily energy intake of 8 820kJ, according to Statistics South Africa.
According to Neil Roets, chief executive of Debt Rescue, the latest Debt Rescue survey supports these figures, with 40% of participants indicating they have too much debt to cope with, while 40% have impaired credit records.
“With the volley of living cost increases that just keep hitting middle-class South Africans from all sides, they can no longer cover their basic costs. It is this consumer who turns to credit to see them through,” he warned.
This is a very precarious position for consumers and the country and the repercussions will soon be felt as consumers head for a tighter money crunch, as a perfect storm is stirred up by increasing interest rates, rising inflation and steeper fuel prices.
Roets said all factors pointed to this as the beginning of a national disaster as countries around the world rely on the middle class to stay afloat. “The danger lies in the possibility of the bulk of SA’s middle class being pushed below the poverty line.”
Statistics SA’s latest consumer price index shows inflation is going through the roof, with annual consumer price inflation lurching to 6.5% in May this year from 5.9% in April and March, breaking through the upper limit of the Reserve Bank’s monetary policy target range.
“This is the highest reading since January 2017 when the rate was 6.6% and it is no surprise that fuel in particular is a major contributor. In fact, the impact of fuel is so great that removing it would see the headline rate fall from 6.5% to 5.1%.”
His advice to consumers in the middle and lower-income groups was to take a careful look at their monthly budgets and see where they could cut costs by being extra vigilant.
The electricity bill is a sizeable expenditure for most households and small adjustments can make a big difference. Replace light bulbs with energy efficient ones, invest in a geyser blanket to retain the heat and prevent the geyser from heating up so frequently, review the thermostat temperature and look at investing in a trimer to ensure the the geyser only heats up when the geyser is in use.
Consumers can also save by adjusting shopping habits. Make a list before you go to store to ensure you remember what to buy and do not buy goods you already have.
Check the community newspapers for specials. Use your loyalty cards and coupons to save. If you have some space, plant hardy, easy to grow vegetables.
“Looking after your credit record is one more important area where taking charge can make a big difference,” Roets said.