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More and more media reports are highlighting the plight of South Africans struggling to stay afloat financially. The reason is simple – high inflation and interest rates.
When you start talking to those around you, you’ll quickly come to realise that you are facing similar expenses due to the current economic climate. If you are feeling the impact more than ever, it would be wise to speak to a debt counsellor because it is essential to understand the inevitable effects of inflation, rising interest rates, and accompanying economic challenges.
According to Nanika Prinsloo, an attorney and conveyancer, rising interest rates take a large bite out of salaries. "While your salary remains constant, the gaps that need to be filled are getting bigger. Additionally, elements like loadshedding come with extra costs due to alternative power generation methods. This is an additional expense that needs to be accounted for. Load shedding also affects business production and creates a ripple effect."
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Nadia de Weerdt, a debt counsellor at Sandton Debt Counselling and the Western Cape representative of the Debt Counsellors Association of South Africa, says that apart from rising living costs and stagnant salaries, many people have also lost their jobs due to Covid-19 and are surviving by relying on credit facilities or loans.
"Many of our applicants are forced to accept lower salaries than what is realistically required," she says.
According to De Weerdt, loadshedding, the Covid-19 pandemic, riots, and floods have contributed to massive problems.
"Business owners struggle to keep up and cannot afford to offer salaries that are in line with the average basic needs of South Africans."
She says a good indication of this is statistics provided by the National Credit Regulator (NCR), which show that unsecured debt, such as overdrafts and credit facilities, has increased sharply in the past few years – to the point where it has overshadowed secured debt.
"For example, anyone who bought a house during the lowered repo rate period from 2020 to 2022 will now experience pressure with the sharp repo rate increases," she explains.
You can still manage your finances
Prinsloo says although it is difficult to always stay on top of things, her advice is not to fall behind on debt payments. "No matter what happens, once you miss one payment, it is difficult (if not impossible) to catch up. Don't buy items on credit that are not essential, like clothes. Instead, keep your account clean and try to make cash purchases."
De Weerdt's first tip is to revoke authorization to increase credit limits annually, since it aggravates the problem.
"Adapting to a proposed lifestyle is not always possible, but the smallest change can make a big difference," is her advice.
She says it is necessary to count every penny. An additional job in the current economic climate is also something to consider.
"When your basic needs are covered, it will be better to downgrade to something more affordable rather than continuing to take out loans or shift credit facilities around," she says.
How to find the perfect debt counsellor
The NCR has a list of registered debt counsellors with an assigned registration number for each counsellor.
While it is not a prerequisite to belong to any given association, it adds an additional layer of security for consumers.
De Weerdt advises consumers to verify any details they find about a debt counsellor (and registration number) and cross-reference them through their website, social media, reviews, and responses to those reviews. This will ensure that you choose the company that best fits your needs.
"Preferably, you should ensure that it is a well-established company with a traceable history and record. Financial matters are very intimate, so it will be beneficial to do your 'homework'," says De Weerdt.
"If there is pressure for you to join a program or if they do not provide complete answers, it is better to look for another company," she warns.
"Debt review is not a product or a gimmick, but a professional service regulated by the government (NCR) and valid for up to five years.
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