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Media Info
 Soaring prices hit home
20 November 2008
By Lyse Comins and Sapa
South Africans are cashing in their insurance policies, borrowing heavily, cancelling holidays and swopping eating out for entertaining at home this Christmas.
Some people are so deep in debt that they are spending one third of their salaries to pay back the debt.
And even as consumers battle to make ends meet during the global economic downturn, food retailers anticipate consumers will splash out on festive fare. This despite the depressed climate, which has dented profits in recent months.
Unemployment in the third quarter was 23,2 percent, according to Statistics South Africa. Food inflation hit 17,8 percent in August.
The Consumer Union has called on the Reserve Bank to drop the interest rate to help people.
Research by the Bureau of Market Research at the University of South Africa showed that the debt burden of South African households had increased by 21 percent. Most heavily indebted were those earning more than R500 000 a year, said Snyman.
The debt represented more than 135 percent of their disposable income and they used 34 percent of their disposable income to pay back debt.
Efficient Group economist Dawie Roodt said Reserve Bank figures showed consumers were borrowing excessively, 15-16 percent more than a year ago.
"People don't realise what bad trouble the world is in and it's probably going to get worse before it gets better. We have had peole consuming
more than they have been producing for far too long, and people spending on credit," Roodt said.
"People are so irresponsible with credit, and even under the current difficult conditions they are still borrowing a lot of money."
Debt counselling organisation Consumer Assist chief executive officer Andre Snyman said yesterday they were seeing more and more heavily indebted people taking a risk of no insurance or cashing in policies early.
Snyman said debt counsellors were against this as consumers run the risk of losing everything they
owned if they were robbed. "Insurance should be seen as a form of protection."
The organisation said it recommended consumers review their insurance policies annually while adjusting their premiums and it warned consumers against taking "hasty, short-term measures" that could, over a period of time, worsen their creditworthiness.
Consumer Union vice president Ina Wilken said high fuel prices and a prime interest rate of 15,5 percent had made it difficult for consumers to survive.
"Consumers are going through a very tough time and must forget about their next door neighbours. If they want to overspend, let them... we must try our utmost to be a saving nation.
Nobody warned consumers that interest rates were going to go up, and families who had R200 000 homes bought up for R500 000. Now, 12 months later, they can't afford the house. Money for the basics is now going to the loan," Wilken said.
"The Reserve Bank governor must help South Africans by lowering the interest rate."
Retailers have prepared for a busy festive season, but say they have stocked up on cheaper treats, and toys under R100, in anticipation
of a surge of spending on affordable luxuries.
Furniture and electronics retailers selling big ticket items are expected to take a knock on sales. Food inflation hit 17,8 percent in August, the highest since January 2003, according to the National Agricultural Marketing Council's
quarterly food price survey.
The report showed massive increases in the price of basic items like brown bread (38,31 percent), oil (99,15 percent), rice (60,43 percent), spaghetti (34,59 percent), dairy products (17,90 percent) chicken portions (16,85 percent), eggs (20,62 percent) and cabbage (38,08 percent).
To fight inflation consumers have been stocking up on basic items during promotions, buying down, and in some cases buying luxury items as a substitute for eating out, local supermarket retailers and butcheries said this week.
Spar group merchandising director Mike Prentice expressed concern that even the most basic food items, like maize and oil, were slipping out of reach of the poor.
"People are just so cash strapped they have not been able to take advantage (of specials) and we have noticed people are buying down, and not from Nescafe to Ricoffy... people are down-trading from buying 10kg packets of rice to 5kg and from 2l bottles of oil to 750ml. That is very frightening because that is saying people are not getting enough to eat," he said.
He said the supermarket had noticed bulk buying by stokvels in township and rural stores such as
Thoyandu and Umlazi but most individuals did not have cash to buy in bulk.
Pick 'n Pay general manager for KwaZulu-Natal, Wim Theron, attributed consumer bulk buying to perceived value for money. "We have noticed an increase in bulk purchases, especially on advertised lines. Rice, oil, sugar, frozen chicken and bulk toilet rolls are currently the most popular bulk purchases," he said.
Bluff Meats partner Calven Robinson said consumers were rushing out to buy meat before the festive season spend, which he expected to kick off next week.
A spokesperson for Shoprite Checkers said the group had imported 180 additional containers of crockery, glassware, gift items, toys and stationery for Christmas.
FOR FURTHER INFORMATION www.consumerassist.co.za 0861 21 22 23 debt counselling call centre
Andre Snyman - CEO - Consumer Assist
aurelia.espag@consumerassist.co.za / 011 654 6018 (Languages: English, Afrikaans)
Source: Daily News
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