Goolam Ballim, the chief economist with Standard Bank said it is genuinely going to be one of the darkest winters for South Africa as most people are going to lose their homes and cars.
Ballim said efforts by the Reserve Bank's monetary policy committee to control inflation and curb spending would affect consumers at least until 2009.

“The government could ease some of the pressure on consumers by injecting investment into the economy from money allocated in the Budget for capital projects, such as transport and other infrastructure, thus creating jobs,” he said.

Last week, Statistics South Africa released data showing that the number of bad debts had risen by 17% in February compared to the same period a year ago.  This confirmed the fears of banks and retailers, which had reported higher than usual incidents of customers defaulting on home loans, car repayments, credit cards and retail accounts.

Statistics SA said the 17% increase for debts had resulted in 60 920 judgments worth R560 million the first time it had found an increase since October 2007.

The largest contributors to the civil judgments were for loans and acknowledgements of debt.

The South African National Consumer Union, said the national credit laws were having a negative impact on consumers and preventing them from consolidating debt, but the direct contributory factors to hardship were interest rates and rising food and fuel costs.

Ina Wilken, the deputy chairperson the consumer union said if Eskom was successful in increasing the electricity tariffs by 60% it would get worse.

"It really is awful for consumers. Banks are turning them down for loans, many are already having their houses and cars taken away because of non-payment and many more will end up in a similar situation because things are just getting worse."

Two weeks ago, the Reserve Bank, announced the repo rate would go up to 11,5%, with banks pushing up interest rates to 15%, a five-year peak because of worsening inflation, and Eskom's proposed electricity tariff hikes have added to the worsening outlook.

Interest rates have been hiked by a total of 450 basis points since mid-2006.

This latest hike would further negatively influence the affordability of housing, making it harder for consumers to service debt, putting even more pressure on the already stretched financial position of households.

The 450 basis point increase in interest rates since June last year has caused the average monthly repayment on a mortgage loan to rise by 32%.

Keywords:  south_africa business society