A wave of protests has swept across the country with the #FeesMustFall campaigning gaining momentum and strength at a number of tertiary institutions in South Africa. The protests started at Wits where students demonstrated against the proposed 10.5% fee increase for 2016. Other universities had announced similar increases for next year.
23 July 2015
Consumers that have borrowed money will be hit hard by the latest announcement from the South African Reserve Bank (Sarb) that it will hike rates by 25 basis points believes Ian Wason CEO of DebtBusters, South Africa’s largest debt counsellor. This is the first time that the SARB has increased the repo rate since hiking it by 25 basis points in July 2014.
“A repo rate hike on its own wouldn’t have been impactful but consumers are being squeezed by other prices going up too, such as food, electricity and petrol. To make ends meet many South Africans borrow money through personal loans, microloans, payday loans and credit cards to tide them over and with the latest hike in the repo rate credit is bound to get more expensive,” said Wason.
He added: “Consumers already struggling with debt need to prepare themselves and find ways of cutting back on expenses so that they are not forced into opening other lines of credit to pay back loans that they already have.”
Wason admits that there are a number of positive developments that could relieve borrowers in the future, such as the proposed new interest rates and inflation fees for credit agreements and the proposed cap on credit life insurance premiums. “But these changes won’t help borrowers just yet as government still has a lot to do before these changes, if approved, gets pushed through parliament. But the repo rate hike will affect borrowers now, with the biggest impact being felt by consumers with home loans as it is a relatively large increase in their repayments, compared to an increase on unsecured debt which has an interest rate more than double that of home loans.
“I would urge consumers that are already struggling with debt not to borrow any more money now and to concentrate efforts on paying loans that are currently outstanding. If most or all of your income is going toward repaying bills and lenders, seek help from an accredited debt counsellor, like DebtBusters, who can help to restructure your credit agreements and negotiate better rates on your behalf,” advised Wason.
This week, DebtBusters released its Debtometer report (Q1, 2015), which provides clear insight into the businesses’ 35,000 clients that approached it for debt counselling services.
“Our figures show that it’s often the poor that are hardest hit by debt. Low income earners (who earn less than R10k per month) have 90%+ of their debt as unsecured debt. With the current repo rate hike and the potential for further hikes before the year ends, it’s likely to get only tougher for borrowers,” said Wason.