It’s that time again when the kids put down their Xbox controllers and pick up their books. Back to school is a time when many parents breathe a sigh of relief as peace is restored to the home again, but debt management cannot be forgotten!
25 August 2013
DebtBusters reviewed the statistics on the Consumer Price Index (CPI), released on the 21st of August 2013, by The South African Reserve Bank (SARB). It was evident that the Consumer Price Index (CPI) for July 2013 amounted to 6.3%, which drastically increased from 5.5% in June 2013.
Following on from this, Ian Wason, DebtBusters CEO, spoke to eNCA News about the Consumer Price Index, inflation rates and the grocery costs increasing three times the rate of inflation.
Well to discuss, we now joined by Ian Wason from the Debtbusters group, he joins us from our Cape Town studio. Ian Thank You for joining us. Is this based on what your clients are saying basically?
Good evening Francois, well Debtbusters is South Africa’s largest debt counsellor and over the last 5 years we’ve taken on over 20 000 clients, increasing at about 800 clients a month at the moment. As part of our process we obviously collect a huge amount of data on those individual clients. One of the most important elements of data we collect is the clients’ budget, which we spend a lot of time on going through with the client, there are 25 line items in the budget we do.
All our information is stored on a big CRM system so we can extract the information, and see the trends very clearly, and having seen the inflation number at 6.3% released yesterday we decided to have a look at what the grocery bill was for South Africans under debt counselling with us and its increased by nearly 18% on an annualised basis.
It’s incredible but if I remember the figures from yesterday there wasn’t a big red flag around food costs in the CPI data there was more concern about petrol , things like that, are the authorities keeping track of this?
Ian: I don’t know we all know when we do our shopping that food prices are going up quickly. If we had a receipt from this time last year I guarantee you it be a lot more than 6. 3% the bill would come to this year than appose to last year.
Francois: Why are food prices going up much faster than inflation, in your opinion?
Well there’s obviously a combination of factors, the rand has obviously being depreciating traumatically over the last year, I think its 24% down, so the biggest depreciating currency, emerging market currency. That also pushes up petrol prices and of course petrol prices feed into everything that we consume. Unfortunately for our clients, is that they’ve got into the position that they need to come to debt counselling because they’ve been trying to keep their head above water.
Their wages haven’t been rising as fast as inflation, as we know with groceries and electricity and petrol, so they’ve been borrowing money to try and keep their head above water. And they come to us when they can no longer borrow from Peter to pay Paul and they can’t borrow any more money to put food on the table at the end of the month and we immediately relieve that cash flow for them.
And you’re talking about people who are relatively high earners who are earning above R20 000 a month, so it must be so much more painful for poor people who we do know spend a larger proportion of their income on food.
Absolutely, its groceries, rent and transport which make up the bulk of a person with an income less than R6 000. That being said, R20 000, is the average income of our clients, so let’s not think that debt only affects poorer people. Debt affects the complete spectrum of South Africans in fact that the most over indebted consumers in South Africa are LSM 7 and 8.
Which is a worry? What is your advice to consumers who are feeling the pinch especially in relation to food? Is it worth shopping around?
It’s definitely worth shopping around, it’s definitely worth comparing prices, we give our clients a lot of tips as to how they can save money on their grocery bills and quite a good tip we use is write a grocery list before list before you go into the supermarket and only buy what is on that list.
Because as we all know when we get to the checkout till there’s a whole load of stuff in or shopping that we don’t actually need. There’s the packet of crisps and the chocolates and the nuts and you name it, those little luxury items just sneak into our basket. It takes discipline to live on a budget and to reduce your expenses. And that’s what we encourage our clients to do.
And has been said before; don’t go shopping when you are hungry. That was the CEO of Debtbusters group Ian Wason.