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Media Info
 Major debt counsellor expresses concern about array of increases for taxpayers
5 November 2009
An array of increases on taxpayers and those who pay for utilities will delay attempts to curb consumer debt and delay economic recovery, Andre Snyman, CEO of South Africa's largest debt counselling company Consumer Assist has warned.
"The straw that breaks the camels back for many homeowners are very high utility bills that if they don't pay the lights get switched off - and so they pay, but often to their detriment, it pushes them over the edge and they begin battling to pay all bills." Snyman said that he was concerned that the recent sharp increase in electricity and future suggested hikes would push many consumers into serious debt.
"Salaries are not keeping up with inflation and with close to 1-million retrenched this year the capacity of people to pay becomes constrained. Many do not seem to realise that arrears like rates and property taxes cannot be included under debt review. Municipalities can take action that debt counsellors cannot assist with.
"Repayment terms could be negotiated for say a loan, a car, a home or retail and credit cards.
"People also don't seem to realise that regular, fluctuating payments like Telkom, cellphones, water and lights are not considered fixed credit agreements, but living expenses. This means that arrears with these payments can be negotiated with creditors to be under debt review but these creditors do not need to accept this."
He said that the promised cut in cellphone charges - which has failed to materialise and looks unlikely now until next year - "could have a significant impact for business people, especially rural and small business people. Because there are not enough landlines they use cellphones for all their business transactions. They desperately need some sort of relief from growing pressures and tight business conditions."
Snyman pointed out that while electricity use was widespread in South Africa only a relatively small percentage of consumers actually pay their bills, "illegal connections place a significant drain on resources."
He pointed to a proposed one percent tax increase on all salaries and wages to fund the SABC and warnings of additional income tax hikes from Minister of Finance Pravin Gordhan.
"Those who pay tax and other services are a relatively small percentage of South Africans. They are the most skilled and form the productive cream of the nation. They carry other high costs such as those for private healthcare, education and security because of deterioration in those sectors. They are becoming financially overburdened and other ways of funding need to be found rather than milking the same small group."
Research by Consumer Assist has shown that those who earn R15 000 and upward and in the most skills-desirable and labour-productive phases of their lives - from 30 to their mid-40s - are those most seriously in debt. Additional research by the University of South Africa claims that the most indebted group earn more than R700 000 a year.
On Tuesday Sanlam chief economist Jac Laubscher told parliament's select committee on finance that taxes were already too high and that government spending would need to be cut. He said the tax to GDP burden had risen considerably above government benchmarks of 25 percent to 32 percent and compared to an average of 18 percent for other middle-income countries.
Government is considering raising taxes because expenditure is high and tax revenue this year has collapsed R70bn. Laubscher said South Africa's bureaucracy was too big and that salaries alone now constituted 57 percent of payments.
Backing Snyman and Laubscher's call is yesterday's (Wednesday) Financial Stability Review from the SA Reserve Bank which shows that eight of 13 indicators signalled households were in distress:
- Household incomes on average have dropped 4,3 percent;
- There has been an 8,7 percent decline in household net wealth;
- A fall of 10,1 percent in the value of household financial assets;
- Household debt is 47,1 percent of GDP up from 46,3 percent.
Total new car sales are down almost a third (29 percent) with the largest drops in commercial vehicles 26 percent and heavy vehicles - 49 percent, according to the National Automobile Association this week.
"Economists are warning that if you overtax the productive classes they will begin finding it too difficult to increase their businesses which mean job creation will stagnate. And too while poorer South Africans burn tyres in the streets to protest, better educated South Africans remain silent but go to the embassies of Australia, Canada and England and look for opportunities elsewhere in countries where tax may be as high, but schools, healthcare and safety better.
"We are very concerned at the fact that we are increasingly getting members of parliament, corporate executives and professionals sitting in debt counsellors' offices and weeping because they can no longer cope with their financial burdens," Snyman said.
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: Charlene Smith Communications(CSC)
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