Cancel Christmas and save

2007-12-07 00:00

STRESSED consumers in South Africa should cancel this year’s Christmas spending spree and that includes the traditional Christmas holiday. The combined blow of a hefty 43-cent increase in the petrol price and next week’s inevitable 0,5% increase in the repo rate, which means a prime overdraft rate up to 14,5%, are just too much for consumers whose household debt already totals 80% of household income.

Trader Vic has never attached any sentimental value to Christmas and also prefers holidays out of season rather than paying R10, or is it R15 already, for a little glass of sweetened warm water on an overcrowded beach. However, we’re not talking about Trader Vic’s sentiments here, but about the people who can least afford the trend at Christmas time to splash out with their money and especially the bonus.

In case you haven’t made the calculation yet — a half a percentage point increase in interest rates will increase the monthly repayment on a R1 million mortgage by about R420. The higher fuel price will add at least R130 per month to the running expenses of the ordinary household. Add to this a higher credit card payment in January and February, thanks to reckless Christmas spending, and you will feel all the distress of the stressed consumer.

Last week, Fin24 was swamped with complaints, threats and senseless political arguments simply because we had the effrontery to report that the petrol price was going up by 43 cents a litre. Some disc jockey at a Pretoria radio station even accused the government of insensitivity because it increased the fuel price just before the holidays. With such rubbish being broadcast, I can see why consumers are so ill informed.

The fuel price is adjusted monthly and in December we pay the price that was the actual cost of fuel in November. I don’t know whether DJs are literate or not, but perhaps someone who can read can tell him.

Some simple advice — cancel Christmas and your December holiday. Use your bonus to pay off some outstanding debt and if one day you get so far that the bonus can be used to put you one payment ahead in paying off your car or house, you will really enjoy a happy Christmas.

Recently, I was standing in the queue at Woolworths. By the way, Trader Vic is seldom prepared to pay this retail group’s high prices for ordinary items.

The person ahead of me had to pay R182 for some shopping, including a smallish butternut for R15. When the cashier asked him, “Straight or budget?” after he handed over his credit card, the reply was a firm “Budget”.

Tito Mboweni has often complained about credit cards that are so easily obtainable. Trader Vic is complaining about consumers who buy vegetables at a notoriously expensive shop using the budget facility of their credit cards. The consumer needs education, not higher salaries and more credit cards. Good education is accompanied in part by hardship — hardship such as higher interest rates, even if this means homes being sold on auctions.

In October 2006, I asked for a sharp two percent increase in the repo and other lending rates. Mboweni didn’t listen to me, in fact, he didn’t even reply to me. However, one reader called me “a silly old goat”.

Inflation, and that’s in fact CPIX, is currently more than seven percent, the current account of the balance of payments is heading for another shocking deficit and the Reserve Bank’s quarterly report coming out in December will probably show that household debt is now more than 80% of household income.

Even earnest prayers along with the next 0,5% interest rate increase won’t help. Christmas, with its usual excessive and irresponsible spending, should be cancelled this year. — Fin24.

• Trader Vic is one of South Africa’s most respected market commentators and contributes a weekly online column aimed at traders.

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