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South Africans have been living with sustained load shedding for several months now and now the National Energy Regulator’s massive 18.65% increase in electricity rates is also being implemented. It is therefore not surprising that the results of a recent survey by Debt Rescue show that the vast majority of South Africans no longer believe that they can afford to keep the lights on. Ina Opperman tell more
More than 1,000 people took part in the survey and their responses reflected the desperation of people across the country, with an overwhelming 77% saying they believed the cost of electricity had become unaffordable, while a staggering 89% said it was affecting their budgets. will significantly affect.
This would all be well and good, if it were not for the fact that all but a lucky few cannot live without the power that Eskom provides. With winter approaching, the country needs Eskom to function more efficiently, so that households can stay warm, food can be made and there can be light in the dark.
“South Africans are being asked to pay for corruption and mismanagement at Eskom in the most unfair and unaffordable way,” says Neil Roets, CEO of Debt Rescue. “40% of those we surveyed said they already spend between R500 and R1 500 per month to buy electricity and that they simply cannot absorb another increase.
“Furthermore, families earning the least have to spend a disproportionate amount of their income on essentials such as transport, electricity and food, while still having to contend with the double-edged sword of crippling power outages. This is the real state of national disaster,” he warns.
While the government advises people to use electricity sparingly, with constant announcements that the grid is under pressure and advice akin to ‘just keep dancing in the dark’, most people have taken measures to reduce their electricity consumption .
According to Roets, 61% of the participants confirmed that they invested in energy-efficient appliances, 29% switched to prepaid electricity in an attempt to reduce their monthly consumption and 16% had solar power installed.
“The power of chance has a disturbing effect on every South African’s way of life,” says Roets. “This was unequivocally confirmed by 65% of those surveyed, who said that load shedding had seriously affected every aspect of their lives. It is hard to believe that the government is unaware of the dire circumstances in which most of the population currently find themselves.”
While consumer price pressure has gradually eased since the second half of 2022 and raised hopes that the Reserve Bank can soon end its hike cycle, the subsequent intensity of load-shedding and its effects on businesses in particular have put a damper on things. This is corroborated by energy expert, Lungile Mashele, who says that the coming winter months are likely to be even worse.
The latest consumer price index rings the doomsday bell for 61 million citizens with the news that South Africa’s inflation rate rose to 7.1% in March due to the sharp rise in food prices. Most disturbingly, food inflation rose by 14% in the last 12 months, taking the annual food inflation rate to a 14-year high – the biggest annual increase since March 2009.
This means that families across the country cannot expect any relief in the cost of their monthly food baskets in the near future and, as always, it is the most vulnerable households who suffer the most. “Why don’t we see more decisive action being taken?” asked Roets.
How to get rid of your debt
How to get rid of your debt is a question that consumers often ask, since most of them are in a lot of debt and would like to escape from the debt trap. Middle-income consumers spend an average of 30% of their income on unsecured credit and 35% on secured credit, with little left over for the rest of the month.
TransUnion’s ongoing Consumer Pulse study shows that more than half of South African households (55%) are still feeling the effects of the pandemic on their finances, with 85% “highly concerned” about their ability to pay their bills and loans to pay, including personal loans, mashonisa (informal and/or unregistered credit providers) loans, private student loans and retail and clothing store accounts, says Kriben Reddy, head of consumer affairs at TransUnion.
Tips to reduce your debt
TransUnion’s advice for consumers to reduce their debt includes:
- Budget, budget, budget. The only way to stay on top of your finances and avoid overspending is to create an effective budget. It doesn’t have to be complicated.
- Save for unforeseen expenses. Try to set aside a portion of your salary to pay for any unexpected financial crises, such as health emergencies or major repairs to your car or a household appliance. This way, you can avoid being forced to use expensive credit to deal with unexpected expenses.
- Pay off your debt. Prioritize your debt and if you can afford to pay more, start with the most expensive debt first. If you can, pay more than the minimum balance due each month, or you’ll end up paying more interest than you have to.
- If you will struggle to pay all your debts, talk to your creditors and restructure your repayments. As soon as you miss a payment, it affects your credit score negatively and will harm your chances of getting credit in the future.
- Get your latest credit report that lists your current credit accounts, including credit cards and home, car and student loans. Check your report for any errors that could affect your credit score. Once you know what your score is, you can start taking steps to improve it.
- Change your spending habits and carefully manage your exposure to credit. Make sure you pay off the full balance owed on your credit card each month. And if you want that fancy new big screen TV, save up for it.
Look after your home loan
Tej Desai, CEO of Alefbet Collections & Recoveriesalso has these tips for getting rid of your debt:
- Be proactive and talk to your creditors if you are at any risk of missing out on your debt repayments.
- If you pay off debt with one creditor, use the money you were already used to paying to top up your next repayment, meaning you’ll significantly reduce your term and interest.
- Don’t use your home loan equity to consolidate your debt because you could end up paying more in interest.
- Think very carefully about debt review because it will prevent you from getting new credit and you can’t leave the process until all your debts are settled.
- Take a good look at your spending habits and avoid those that lead you into unnecessary and impulsive spending traps.
- If you’re experiencing financial difficulties as a result of layoffs, see if you have credit insurance on some of your loans, retail accounts, and credit cards to protect you if you lose your job and can’t pay your debts.
