Indebted households are a concern according to Pravin Gordhan, the Minister of Finance, who spoke in parliament yesterday for the 2014 budget speech.
Addressing parliament on the budget speech for the fifth time, Gordhan stated that growth in South Africa has been mundane due to the budget deficit of 4.8 percent of the GDP, or Gross Domestic Product. Gordhan however, predicts that the budget deficit will decrease to 2.8 percent of the GDP by 2016/17.
One of the hot topics on the agenda was the state of debt. Debt service costs took R114 billion of the allocated general public services budget. Gordhan stated that investment into people’s future was important, and the state of living from hand to mouth would need to be assisted and adjusted.
Consumers were not the only ones who were struggling due to financial restraints. Shoprite Checkers, who target the lower income market, have seen disappointing numbers in South Africa, possibly due to these high debts and interest rates affecting consumers.
Nadim Tompatien, a finance expert from 24/7 investments said, “Shoprite has seen the effects of slow business as their consumers in South Africa cannot afford to shop at the chain anymore, preferring the roadside stalls for their shopping needs”.
”The low income consumer is suffering under a mountain of debts, increasing interest rates and shedding of jobs.” stated Tompatien. “Over the past year, Angola’s 5 Shoprite stores have sold more Red bull than all of South Africa’s 380 Shoprite stores put together.”
J.W Basson, the CEO of Shoprite Checkers is looking to Africa for growth.
The purposed budget by Gordhan will offer respite to companies such as Shoprite and debt affected households by providing R9.3 billion in income tax relief to households. The government is also working on programmes in employment and is hoping to improve the situation in the next three years, stated Gordhan
Health, education and public order safety received the majority of the budget allocation. The fuel levy went up by 12 cents as was expected, whiskey will now cost R4.80 extra and cigarettes 68 cents more expensive. Grants were increased across the board and a hopeful Gordhan ended with, “We have achieved much over the past five years, in a very difficult post-recession climate. But there is more to do ahead, more to build, more to put right, more to learn, more to implement. We can only do this together.”