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2023-04-01 at 05:02 #398554Nat QuinnKeymaster
South Africans need to get ready to tighten their belts in April, with a 13-year-high interest rate, electricity price hikes and medical aid contribution hikes heading their way.
Cash-strapped consumers have faced months of financial struggle, with savings continuing to decline and more people relying on credit.
Neil Roets, the CEO of Debt Rescue South Africa, said that people are increasingly turning to credit to survive the relentless onslaught of cost-of-living increases showing no sign of slowing down.
Data from Eighty20’s Credit Stress Report for Q4 2022 there were over 800,000 new entrants into the credit market, the highest since the pandemic.
Meanwhile, the total average instalment-to-income ratio for middle-class South Africans has increased by 7.4% over the last year and is now sitting at 69.4% – meaning more than two-thirds of the average middle-class salary goes to servicing debt.
From April, South Africans will face a barrage of further price hikes:
Interest rate hike
On Thursday, 30 March, the South African Reserve Bank (SARB) voted to hike interest rates by 50 basis points – going against market expectations.
Interest rates are currently sitting at their highest point in 13 years (June 2009); the last time they were this high was during the global financial crisis.
The new hike takes the repurchase rate to 7.75% and the prime lending rate to 11.25%, hitting car repayments as well as bond repayments hard.
For example, those South Africans with a bond over R1,000,000 are now paying R341 more on their monthly instalments – taking monthly repayments from R10,152 to R10,493.
There seems to also be no slowing down for rate hikes, with the SARB governor Lesetja Kganyago stating that the repurchase rate is more consistent with the updated current view of risks to inflation, which continues to increase.
“Economic and financial conditions are expected to remain more volatile for the foreseeable future. In this uncertain environment, monetary policy decisions will continue to be data-dependent and sensitive to the balance of risks to the outlook,” said Kganyago.
Inflation is now expected to revert to the mid-point of the target range by the final quarter of 2024.
Standard electricity customers are expected to face an 18.65% electricity tariff hike from 1 April 2023.
The electricity hike is expected to assist the embattled power utility Eskom in digging itself out of dire financial straits.
The latest hike faced major public backlash, with many South Africans pleading for it not to be approved as they already face a severely unstable electricity supply and constant load shedding.
Customers will likely now be pushed to adopt rooftop solar and renewables incentives in an attempt to move off of Eskom’s grid; however, these come at a very high cost.
The National Energy Regulator Nersa also approved an 18.49% hike for municipalities, which will come into effect from 1 July.
Medical aid hike
Medical aids across the country are expected to hike contribution prices from 1 April.
Bonitas is expected to increase by an average of 5.9% across all plans, while heavy hitters like Discovery Health are set to see an average 8.2% hike.
Discovery said that the new adjustments are in careful consideration of medical inflation.
Momentum Medical Scheme has also announced that there will be a further contribution increase in April this year, where it is expected to hike by 8.5% on average.
The latest medical aid hikes come after a wave of deferred increases in late 2022. The deferring of increases has, however, raised concern that April’s inflation data (published in May) will see both headline and core inflation pushed higher as a result.
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