In Temporary: Repo Fee choice pushing customers deeper into debt.
Neil Roets, CEO of Debt Rescue, says the South African authorities’s current choices, together with conserving the repo fee unchanged, rising VAT, and failing to regulate private earnings tax brackets for inflation, are putting immense monetary pressure on customers. The extra 12.7% electrical energy tariff hike will additional erode disposable earnings, making it even tougher for households to maintain up with rising dwelling prices.
Roets describes these mixed actions as a “deadly one-two punch,” leaving hundreds of thousands of South Africans dealing with elevated debt burdens and heightened monetary misery. He notes shopper debt stands at round R2.3 trillion, with many people dedicating 68% of their earnings to debt repayments.
Authorities delivers a deadly one-two punch to customers
Story by Ashley Lechman
South African customers acquired no aid from the South African Reserve Financial institution (Sarb) on Thursday after the central financial institution’s Financial Coverage Committee’s (MPC) voted on conserving the repurchase fee within the nation unchanged. Sarb governor, Lesetja Kganyago mentioned that 4 members most well-liked this motion, whereas two favoured a minimize of 25 foundation factors.
Which means that the repo fee will stay at 7.5%, whereas the prime lending fee within the nation will stay at 11%. The unchanged fee, coupled with a VAT improve of 0.5% confirmed for this monetary 12 months and a second 0,5% for the 2026/2027 fiscus, has all however extinguished any hope of monetary aid for South Africa’s struggling customers.
This was based on CEO of Debt Rescue, Neil Roets. Roets warned that this deadly one-two punch delivered by authorities will decimate the lives of hundreds of thousands of residents, who’re sinking deeper into a way of hopelessness with every monetary blow.
“Even a small fee minimize would have stored a glimmer of hope alive amongst embattled customers who’re determined to dig themselves out of their monetary abyss and are drowning in debt on account of exorbitantly excessive rates of interest. The extra burden of a VAT improve – regardless of how small – on nearly all of residents, who’re already grappling with excessive ranges of unemployment and rising prices of important items, will take the nation to the purpose of no return,” Roets advised Enterprise Report.
“It’s equally regarding that authorities has opted to not alter private earnings tax brackets consistent with inflation, throughout the 2025/2026 price range, as this successfully will increase the tax burden on people, as salaries develop however tax thresholds stay unchanged,” Roets added. “This, mixed with the 12.7% electrical energy tariff hike that kicks in on 1st April 2025, will heighten monetary pressure and deepen the debt disaster amongst customers.”
“Whatever the financial components – international and home – behind the choice, it’s going to have a profound impact on taxpayers at a time when fluctuating inflation because of rising prices, has considerably diminished shopper buying energy, by lowering the worth of cash, resulting in a steep decline in the usual of dwelling, particularly amongst decrease earnings households. Realistically, that is the place we’re at proper now,” Roets mentioned.
“It’s unacceptable that hard-working South Africans proceed to bear the brunt of the best rates of interest the nation has skilled in over a decade, together with the relentless will increase in dwelling prices, a water shortage disaster that’s quickly escalating and meals costs that place nourishing meals out of attain of probably the most susceptible amongst us,” he added.
The Debt Rescue CEO additional mentioned that South Africans are hanging on by their bootstraps with the typical shopper spending 68% of their take-home pay on servicing debt.
“Whole shopper debt is now at some R2.3 trillion, with greater than half of this being accounted for by means of bonds, based on the Nationwide Credit score Regulator (NCR). Information launched by the NCR, reveals that customers making use of for loans and people in arrears reached a brand new excessive within the third quarter of 2024. Particularly, mortgage arrears rose to six.9% of excellent loans, whereas funds which might be between one and three months overdue additionally stay elevated,” he mentioned.
“One of many main components that traps many voters in a relentless debt cycle is the rising price of credit score because of current debt. That is most evident with huge purchases like dwelling and automotive loans. My recommendation to those that can’t break away from their monetary constraints is to hunt assist from a registered debt counsellor who can help them to handle their monetary predicament. This has been a really profitable answer for 1000’s of customers who’re affected by over-indebtedness,” Roets additional added.
