An array of increases on taxpayers and those who pay for utilities will delay attempts to curb consumer debt and delay economic recovery, Andre Snyman, CEO of South Africa's largest debt counselling company Consumer Assist has warned.

"The straw that breaks the camel’s back for many homeowners are very high utility bills that if they don't pay the lights get switched off — and so they pay, but often to their detriment as it pushes them over the edge and they begin battling to pay all bills." Snyman said that he was concerned that the recent sharp increase in electricity and future suggested hikes would push many consumers into serious debt.

"Salaries are not keeping up with inflation and with close to a million retrenched this year the capacity of people to pay becomes constrained. Many do not seem to realise that arrears like rates and property taxes cannot be included under debt review. Municipalities can take action that debt counsellors cannot assist with.

"Repayment terms could be negotiated for, say, a loan, a car, a home or retail and credit cards.

Not included under debt review

"People also don't seem to realise that regular, fluctuating payments like Telkom, cellphones, water and lights are not considered fixed credit agreements, but living expenses. This means that arrears with these payments can be negotiated with creditors to be under debt review but these creditors do not need to accept this."

He said that the promised cut in cellphone charges — which has failed to materialise and looks unlikely now until next year — "could have a significant impact for business people, especially rural and small business people. Because there are not enough landlines they use cellphones for all their business transactions. They desperately need some sort of relief from growing pressures and tight business conditions."

Snyman pointed out that while electricity use was widespread in South Africa only a relatively small percentage of consumers actually pay their bills, "illegal connections place a significant drain on resources."

Tax to fund SABC

He pointed to a proposed one percent tax increase on all salaries and wages to fund the SABC and warnings of additional income tax hikes from Minister of Finance Pravin Gordhan.

"Those who pay tax and other services are a relatively small percentage of South Africans. They are the most skilled and form the productive cream of the nation. They carry other high costs such as those for private healthcare, education and security because of deterioration in those sectors. They are becoming financially overburdened and other ways of funding need to be found rather than milking the same small group."

Research by Consumer Assist has shown that those who earn R15 000 and upward and in the most skills-desirable and labour-productive phases of their lives — from 30 to their mid-40s — are those most seriously in debt. Additional research by the University of South Africa claims that the most indebted group earn more than R700 000 a year.

Article continues on page two...

Sapa

Enough to retire early? Do you have a large enough pension and/or sufficient home equity to retire early?

Money and marriage When can a spouse lose her or his assets due to the other’s imprudence?

How to make more cash It's not easy to make extra money, but it can be done if you're creative. Here's how...