Even though loadshedding has eased, inflation is slowing down, and interest rates have dropped since their peak in May 2023, many South Africans remain under serious financial pressure.
Average electricity tariffs rose by 190% between 2014 and 2024. This excludes the 2025 12.75% increase for Eskom customers in April. In addition, municipal tariffs are set to increase on 1 July and may vary depending on the cost of supply.
After housing and food, transport is the third highest component of household expenditure. Much of that is driven by the petrol price, which has increased by more than 87% in the past decade.
Meanwhile, most people’s salaries have lagged behind inflation. At 2.7%, inflation is currently below the Reserve Bank’s 3% – 6% target band but cumulatively it has increased by approximately 56% since 2015. This means that something that was worth R100 ten years ago, would cost R156 today.
Given the squeeze, it’s no surprise that more households are seeking ways to manage their debt. For some, debt review may be a necessary next step.
But Gavyn Letley, Product Head from specialist loan provider DirectAxis, suggests that there are a range of proactive steps to consider before taking this step, saying: “Debt review is a powerful tool but it comes with legal implications and long-term commitments.”
Practical alternatives to consider, according to Letley, include:
- Budgeting and tracking expenses: Understanding where your money goes each month, and cutting out unnecessary expenses, is a sensible first step. There are plenty of free budget templates available online. Alternatively, the FNB Banking App, has some free highly intuitive tools like nav» Money’s Track My Spend and Smart Budget tools.
Thereafter, try to focus on paying off debts that attract the highest interest. Free tools such as www.directaxis.co.za/pulse allow you to check your credit rating and provide a summary of your credit agreements, such as bonds, vehicle finance, cellphone contracts and store accounts.
- Negotiating with creditors: Informing creditors about difficulties in repaying them may sound daunting, but it’s a responsible thing to do. Some lenders are open to restructuring payments, reducing interest rates or providing payment holidays.
“Speaking to a credit provider and explaining your situation is always better than simply not paying. If you miss payments or stop altogether, it will negatively affect your credit score. This can limit your ability to borrow money in future or mean you’ll be charged higher interest,” explains Letley.
- Debt consolidation loans: Consumers with a healthy credit score may qualify to merge various debts into one manageable loan with a potentially lower interest rate and single monthly payment. This can also save money on service fees and credit-life-cover costs.
Depending on how the loan is structured, it could also improve cash flow by allowing smaller payments over a longer period. Just be aware that this will also extend the interest payments.
- Using credit life insurance: Consumers are often unaware that their loans could include credit-life-insurance cover. It’s worth asking, because if they do, and your financial difficulties resulted from retrenchment or disability, you may be able to claim.
Letley says if you’ve exhausted these avenues and are still considering debt review, understand that it’s a formal, legal process, in terms of the National Credit Act. That means you can’t obtain further credit until it’s complete and you receive a clearance certificate.
And, should you opt for debt review as a solution, ensure that you fully understand the implications of this process. Also, always ensure that you’re dealing with a reputable debt counsellor who’s registered with the National Credit Regulator.
“When it comes to managing your money, hoping for the best isn’t a strategy but neither is making a rash decision that could have long-term consequences. Rather, calmly assess your situation and do your homework about the best solution for your circumstances. And don’t forget to always speak to your bank or a trusted financial professional to confirm your decision.”
Soweto Sunrise News
