The prevailing high interest rate environment meant less disposable income for consumers, the knock-on effect on the economy as a whole being that consumer spending, particularly on non-essentials such as leisure travel and entertainment, would remain fairly flat.
This was according to James Williams, the Head of Marketing at Wonga.
He said the SARB Monetary Policy Committee left the interest rates unchanged from the current level of 8.25% due to various factors, including a conservative outlook on the rand due to likely short term currency instability as the post election dust settled.
Williams said this meant that consumers who have active credit products, where interest is tied to the repo rate - such as home loans, vehicle finance and long-term personal loans would not see any respite in the monthly cost of servicing their debt. “We would recommend that consumers stay guarded around their spending and try to keep to a well-planned budget that factors in interest rates remaining unchanged until at least the latter half of this year,” Williams said.
Benay Sager, the chairperson of the National Debt Counsellors’ Association (NDCA) said consumers who have financed vehicles and homes would continue to face sustained pressure as the South African Reserve Bank (SARB) kept interest rates unchanged on Thursday.
Sager said that a rate cut later this year was probably unlikely until the very end of the year, if it was going to happen. He said they were not expecting anything to change within the July or September time-frames unless something dramatic occurred. “What this means is that even though inflation is a bit less, consumers continue to be under a lot of financial pressure between the high interest rates and inflation, and they need to keep looking into their pockets in terms of finding extra money and looking for opportunities to stretch their money,” Sager said.
The association said its guidance to consumers would be to encourage them to look at their finances and understand where their biggest expenditure items were. “If that’s debt, speak to a debt counsellor. If it’s not debt, then look for alternative means to stretch your money.”
Meanwhile, according to the Food Price Monitor for May this year published by the National Agricultural Marketing Council, during April, the Consumer Price Index (CPI) released by Statistics South Africa (StatsSA) indicated that the annual headline CPI increased by 5.2%, while inflation for food and non-alcoholic beverages increased by 4.7%.
“The Food and Agriculture Organization (FAO) of the United Nations (UN) publishes its Food Price Index (FPI) on a monthly basis. The FPI consists of five commodity group price indices, namely, the Meat Price Index, the Dairy Price Index, the Cereals Price Index, the Oils Price Index and the Sugar Price Index. The FAO Food Price Index (FFPI) in nominal terms, averaged 119.1 points in April 2024, up 0.3 points (0.3%) from its revised March level, as an increase in the price index for meat and smaller upturns of vegetable oil and cereal indices slightly more than offset decreases in those for sugar and dairy products. Although it registered a second monthly increase in April following a seven-month long declining trend, the FFPI was down 9.6 points or 7.4% from its corresponding value one year ago,” reads the report.
In April 2024, the cost of this basic NAMC urban food basket was R1 263.47, equivalent to a 7.9% (R92.49) increase from April 2023 (year-on-year) and a decrease by 0.5% (R6.15) from March (month-on-month).
The quarterly Food Price Monitoring reports said when comparing April 2024 to April 2023 retail prices, higher price inflation (6.0% or more) was observed for the following products within the NAMC food basket (in order from highest to lowest inflation); Ceylon/black tea, rice, instant coffee, white sugar, potatoes, oranges, eggs, peanut butter, apples, dried beans, cheddar cheese, bananas and baked beans. It added that warm and dry weather conditions influence crop availability of maize, oilseeds and vegetables with strong demand supporting higher prices.
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