- Nigerian finance minister says country needs to tap its non-oil revenues
- Ivory Coast slashes budget on low cocoa prices, President Says
- Nigeria's Buhari Suspends Top Aides Over Graft Allegations
- Economic Growth in Sub-Saharan Africa Rebounds to a Projected 2.6% in 2017
- Kenyan Economy Expands at Fastest Pace in Five Years in 2016
Personal debt levels may have at long last begun to fall in South Africa, but future income tax and petrol price hikes have triggered fears that growing financial pressures on South African households could see this positive change reversed.
What’s on the horizon?
There are a number of upcoming financial challenges which may affect South African households in the coming year. This February, for instance, continuing fuel price rises are predicted to hit forecourts across the country, increasing the cost of fueling up and adding to the cost of transporting goods within the country.
Petrol was expected to rise by 44 cents, with diesel costing 37 cents more and illuminating paraffin costing an additional 31 cents in February. Although March’s price rises are set to be smaller, the amount that South Africa’s spend on fuel is troubling, with a litre of gas costing 6.25% of the average daily salary in the country.
And it’s not just petrol which is becoming more expensive. With finance minister Pravin Gordhan set to announce South Africa’s 2017/18 budget on 22nd February, a costlier year is almost certainly ahead of the debt-plagued nation.
With a R28 billion shortfall to fill, it is likely that steeper taxation of luxuries such as alcohol and tobacco will hit some consumers in the pocket. But it is predicted increases to income tax which will be felt most widely.
Has financial education worked?
Notoriously riddled with “bad debt” (which describes debts used to fund unnecessary expenses such as getaways and shopping sprees, and unpayable debts which are taken on irresponsibly) South Africa has only recently started to see its astronomical levels of personal debt drop.
The South African Government, alongside many other financial organisations such as Wonga.co.za have long been working to increase financial literacy in the country, running initiatives and providing resources designed to educate the population about financial products and their financial health.
Whether or not upcoming financial challenges cause personal debt levels to rise once again may provide insight into just how much South African financial literacy and awareness has improved over the past decade under these schemes.
Will debts rise once more?
So will everyday South Africans be able to shoulder the burden on ever-costlier fuel, increases to income tax and heavier taxation of luxuries without finding themselves drawn, once again, back towards harmful debts and even debt spirals?
Despite a drop in personal debt throughout 2016, household net worth also fell over the same period, leaving many households feeling worse off and less cash rich. Presented with higher costs of living, will South African’s return to bad debt habits or will growing consumer awareness (spurred on by financial education initiatives) prevent a resurgence of irresponsible borrowing? The answer remains to be seen.
Do you think debt is set to rise again in South Africa? How will petrol price rises and income tax increases affect you? Have your say below.