2009: ‘A difficult year’

JOHANNESBURG – SA’s banks say that while lower petrol prices have set the scene for an easier year for consumers, the worst is not over just yet.

‘2009 is going to be a very difficult year, especially with retrenchments,’ Capitec financial director André du Plessis told Fin24.com.
Prospects for the South African consumer are mixed.
On the one hand, the fuel price has declined from over R12 a litre in mid-2008 to about R6 in January, which should contribute to lower price inflation and therefore translate into lower interest rates.
However, lower-than-expected economic growth and the prospect of further job cuts in key industries like mining may put pressure on consumers who are already stretched.
Rob Shuter, who heads up retail banking operations at Nedbank, is slightly more optimistic. He says that in terms of unsecured lending products such as credit cards, overdrafts and personal loans, ‘the worst was behind us’.
This is because less short-term credit was being issued due to stricter lending criteria after the introduction of the National Credit Act in mid-2007.
Fuel price decreases and interest rate cuts expected in 2009 would make consumers’ ability to service their debt easier, says Shuter.
However, they are not completely in the clear; consumers are stil struggling to keep up with repayments on big-ticket items like home loans and vehicles.
Capitec’s du Plessis is not totally convinced that the SA consumer is going to enjoy the benefits of the sharp decline in the petrol price. ‘People were very quick to raise their prices when the petrol price went up but haven’t been so quick to reduce them as the petrol price has fallen.’
Retrenchments have been highlighted as a major threat to South Africa. When African Bank announced its financial results in November 2008, unemployment was identified as a big challenge for the institution.
At the time Abil CEO Leon Kirkinis argued: ‘We have a broad spread of employers across the economy, and no single sector makes up more than 5% or 6% of the economy.’
In December, National Union of Mineworkers’ spokesperson Lesiba Seshoka told Business Day that potential retrenchments in the mining industry industry could rise to 32 000. Affected mining firms included Simmer & Jack, Lonmin, Aquarius, DRDGold and Metorex.
Global aluminium giant Alcoa on Wednesday announced that it would be slashing its global workforce by 13% (about 13 500 jobs) and this would include operations in South Africa. Alcoa joined other multinational firms – including those operating in the mining, automotive, IT and financial sectors – who have plans to scale back on headcount in 2009.
Shuter also told Fin24.com that while South Africans didn’t splurge over the December period, consumer spending was marginally higher than they expected.
This was measured by tracking growth and transactions in the debit and credit card market in terms of the services provided to retailers and other merchants. – Fin24.com