With the festive season behind us and common mantra of ‘the new year, new me’ in full swing, economists believe that for South Africa’s economy it won’t be that simple. With government battling to the keep economy afloat, and the World bank projecting an even lower growth than anticipated for the economy, there are whispers in the finance circles of a looming recession.
The International Monetary Fund (IMF) foresees that economic growth in 2020 will be “sluggish” and “below population growth”, which stands at about 1.6%. Neil Roets, the founder and CEO of Debt Rescue, said there is nothing that indicates financial burdens will be lifted this year and there is no sign (for 2020 at least) of ‘a light at the end of the economic tunnel’.
“For the past couple of years and especially last year, we’ve seen a lot of petrol price increases, electricity hikes and all these kinds of things which filtered through to the prices of other goods and services also going up”
Roets said it is also important to note that an increase in goods does not mean an increase in income thus making 2019 an extremely finically straining year.
“As we know salaries do not go up in line with all those price increases so people had a really difficult time in 2019”.
The festive season, as well as Black Friday saw people jumping on the bandwagon and experiencing serious FOMO (Fear of Missing Out) and spending money they didn’t really have.
“The fact that everybody is spending, they thought they must also be spending. This unfortunately puts people on the backfoot when we start the new year.”
Roets urges South Africans to hold thumbs that something drastic happens within our economy so that hope can be restored and South Africa can avoid a technical recession as the likeliness that it could happen is “very possible”.
With the bleak numbers that the country is faced with, the state may find it challenging to borrow money elsewhere, or even finding investors. Roets warns that the notion of ‘borrowing yourself out of debt’ is simply not the way forward, and is a highly achievable thing to do.
Meanwhile, economist Dawie Roodt warns that the country is likely to see yet more tax increases this year. National Treasury warned last year that while South Africans have been hit with large tax hikes in recent years, bare state coffers need to be boosted. Roodt says it is concerning that the economy is not growing while many people suffer an increasing financial strain.
On the flip side, Deutsche Bank, one of the world’s largest investment banks, is feeling rather different about SA’s economic status. Deutsche Bank says real progress has been made on economic reforms, including a revival of infrastructure projects and industrial policy initiatives. There has also been progress in cleaning up government corruption and an increase in investment pledges. The bank’s 2020 growth forecast is 1.1% and, it says, a downgrade is not likely within the next 12 months.
Subsequently, Roets reminds consumers that there is help available in South Africa in terms of the National Credit Act which provides debt counselling.
“Debit counselling helps thousands of people in South Africa to pay off their debt in an affordable manner without losing their assets.”
“It’s possibly the best legislation of its kind in the world and consumers should definitely make use of it. There is help out there for you and as daunting as debt may be, you are certainly not alone.”