The petrol price increase that is set to take place tomorrow will have a major impact on South Africans already struggling to repay their debt.
This is according to Neil Roets, CEO of debt counselling company Debt Rescue.
“While we fully understand that this is outside the control of the government, it is nonetheless going to slow down any hopes of a revival of South Africa’s economy battered by the COVID-19 shutdown,” said Roets.
Petrol is set to increase in price by R1.18 per litre, while diesel will increase by 22 cents per litre.
The AA previously explained that these increases are due to the resumption of economies across the world – leading to greater demand for these fuels.
“This is not unexpected, and South Africans should remember that the fuel price is currently around four Rand per litre lower than it was before the COVID-19 crisis hit,” said the AA.
Massive increase in bankruptcy claims
Roets said that Debt Rescue has seen a massive increase in the number of clients who are on the verge of bankruptcy.
“We have seen a double-digit increase in the number of clients coming to us to have us place them under debt review,” said Roets.
“We expect this increase to continue for the rest of this year and possibly even to spill into next year.”
He said that a combination of the expected multi-billion rand tax shortfall and the COVID-19 pandemic’s general influence on the economy should be seen as a “ticking time bomb”.
“The unemployment rate could go as high as a record 50%. This means a smaller tax pool and less revenue for the government to spend on development and social programmes such as education, health and social grants,” said Roets.
Get the economy running again
For this reason, Roets believes it is critical that the economy gets up and running as soon as possible.
“We fully understand and agree that social distancing has to be maintained and even tightened to save lives but there is no sugar-coating the fact that consumers are heading for disaster,” he said.
There is little hope for any additional financial assistance either from the state or the private sector, he said.
“Aside from the relief offered by the Unemployment Insurance Fund (UIF) to workers who have not been paid or not been paid in full there are no such packages in the pipeline,” said Roets.
“At the very most financial institutions may give consumers in good standing a longer payment period in which to settle their debts.”
The one positive is that South Africa’s legislation in regard to these economic troubles is some of the best in the world.
“We are lucky in one respect and that is that we have some of the most progressive legislation in the world to help consumers recover from this disaster,” said Roets.
“South Africa has the best legislation of this kind in the world and is the only country that allows home loans to be included under debt review.”