From a personal finance perspective, 2015 has not been a great year for South Africans. The cost of just about everything has gone up, the rand has plummeted, and even the weather has conspired against us.
“People are struggling to make ends meet, food prices are up, medicine costs more, petrol costs more and business is slower,” says Stuart Kantor, the CEO of Kanan Wealth.
We asked Stuart to outline the major cost increases that we have experienced in the past year. The picture is not particularly encouraging, and highlights just how important it is to have a frugal festive season this year.
Although food prices are falling globally, thanks to excess supply, the weakening rand and weak domestic production have meant that we are importing many foods and they are costing us more. By October this year, the cost of food and non-alcoholic beverages had increased by 4.8% year on year. This trend looks set to continue as the drought means that we will import even more food – especially maize – in the coming months.
In February this year, Finance Minister Nhlanhla Nene raised personal tax by an extra percentage point, to allow government to raise an extra R12 billion this year and another R15 billion in 2016. The tax tables were adjusted, however, to provide some relief to lower income earners.
A falling oil price has meant that South African petrol prices would have stayed fairly stable in the past year, if Minister Nene hadn’t increased fuel taxes. From the start of April, motorists paid an additional 80.5c per litre, made up of a 30.5c general fuel levy and another 50c for the Road Accident Fund. In January, the petrol price was R11.02 per litre, and by November, it was R12.08 per litre – a difference of R1.06, most of which can be attributed to the tax increase.
In July, Eskom tariffs for municipal customers increased by 14.24% - more than double the rate of inflation.
Over the last 12 months, the repo rate has increased by 0.25% twice, bringing the increase to 0.5% this year. This means that if you have a R100 000 car loan that you are paying back over 72 months, you will now pay an additional R12 per month, and if you have a R1 000 000 home loan over 20 years, your bond repayment will increase by around R164 per month.
Those who are sensible or fortunate enough to have invested their money won’t have enjoyed spectacular returns this year. While some funds and shares were able to ride out market volatility, many investment funds only delivered lacklustre returns as low as 3.14% or 5.9%.
There’s no escaping it – right now, the South African personal finance landscape is fairly bleak. Stuart says that South Africans should plan to tighten their belts in December, January and beyond.
One of the best ways to make things easier in these financially hard times is to plan ahead. Distinguish between wants and needs and only buy the things you absolutely have to have. Save at the beginning of the month, and don’t dip into your savings when payday is approaching. These good saving and spending habits will be vital to your financial wellbeing in the year to come.
Watch out for our next piece in which Stuart looks at what impact 2016 will have on your personal finances.