Political uncertainly, unrest, an under-performing economy – it’s not much fun being a South African at the moment, especially if you’re facing money worries. Although South Africa isn’t alone in its rocky patch (with economies including the UK and America all facing their own set of troubles), the situation on the ground feels especially worrisome at the moment – particularly after years of financial stresses.
The most personally indebted nation on Earth, South Africa has long had more than its fair share of money problems. Last month’s announcement that S&P had downgraded the nation’s credit rating to junk status feels to many like it could now be the straw which breaks the camel’s back. With the Rand firmly in the doldrums against the Dollar, it’s possible that much of the population is feeling worse off and more financially unstable than ever before, particularly amongst the younger generation.
What’s the problem?
There are many reasons why the average South African might feel as if 2017 is their most troubling financial year in recent memory. Food inflation has been high in recent months, seriously “eating into” the household finances of most ordinary South Africans. And it’s not just food. Petrol prices have been fluctuating in the country for a number of years, but with the devaluation of the Rand, these prices have shot up yet again, rising by 49p a litre in May 2017.
Add to these issues hikes in energy, water prices and the price of imported goods, plus the ever-growing cost of accessing credit and it’s easy to see why many people are already feeling the financial strain this year.
The wider view
The current depreciation of the Rand is linked to a number of different factors, from uncertainty surrounding the political future of South Africa stemming from recent anti-Zuma protests, to slower than anticipated economic growth which has slowed as the population has grown. Together these issues have created a perfect storm, leaving many experiencing “recession-like” symptoms as a result.
Education and inclusion
The perception of overseas markets is only one part of the problem. The financial struggles of the average South African are not news. For years South Africans have been borrowing heavily and failing to save, behaviour many blame on lack of disposable income and poor financial education. In fact, businesses like South African loan provider Wonga believe that better financial education is so crucial to improving the situation, they are creating their own educational resources, stepping in where Government has failed to act.
Poor financial inclusion is also contributing to the overall debt problem in the country. Currently 30% of South Africans do not have a bank account, making it impossible to save or learn about better money management. With the finance sector and the Government seemingly unwilling to invest in improvements in inclusion and eduction, 2017 could only be the beginning of South Africa’s financial nightmare.
Is 2017 proving to be financially challenging for you? What would help improve your situation? Do you have any smart finance tips to share? Tell us all about it below.