Has the Global Financial Crisis affected South Africa and what are the visible impacts from a man on the streets point of view?
Disclaimer: Let me be clear that I am no financial guru, everything stated in this blog entry is from observations around me and what I can deduce from it. This is therefore an opinion that I wish to share and nothing more and does not reflect the opinions of others.
I have been tracking the effects of the “Global Financial Crisis” with interest as this may impact on my wife’s job or mine, my wife being in the inbound tourism industry would be more likely to affect her than me as I am in the IT industry. Never the less, how bad are the effects on South Africans?
To be honest, so far I can only see the over-reaction of many South African based companies, whom are retrenching or streamlining as they like to call it.
As I see it,the petrol price is about half of what it was a year ago at R5.9470 since the 4th of February 2008, and the prime interest rate at 14.00%, a far cry from it’s 24.50% peak of October of 1998 and it is expected to go further down. However, Mr. Tito Mboweni has been very conservative and in my opinion even destructive. He uses the interest rate to curb loans and spending as well as inflation to the point where many have lost their houses and cars as a result. More to the point, most companies make loans to buy the equipment they need, the rates go up and the cost of doing business goes up with it, thus driving prices higher and raising the inflation or is my layman point of view too simplistic? I just sounds logical to me.
Let me point out that regarding the irresponsible borrowing of the vast majority of South Africans was seriously curbed by the National Credit Act (NCA), I believe that was a very good step forward and may have saved us from the fate of the USA and Europe’s banking sectors and resultant financial crisis. However , I must reiterate that I think that the high interest rates hurts us badly in all other sectors.
Additionally, the fall of the Rand, now at around R10.00/USD and volatile at best, imported goods have seen a sharp increase as well as having pushed the petrol price up this must have affected our inflation, this however should help our exports and tourism greatly but will it be enough to counter balance the negative effects?
Now I hear that the consumer price index’s basket is to changed because it’s not correct, not that I understand what a consumer price index is, but I know it’s used to calculate the inflation which in turn affects the financial decision making, including but not limited to the interest rate. Now if the basket is wrong, how long has it been wrong for and how has it negatively affected us?
In short, at this time with the national elections coming up on April 22, a monetary policy committee that bases it’s decision wrong data and a government incapable of making decisions outside their own personal interest, who knows how badly we will be affected?
So far, very little else then pre-emptive measures but truthfully we are part of a world economy.
The world and South Africa is currently in the worst economic slowdown since the 2nd World War. Although the SA Economy is faring better than expected, high interest rates and debt has resulted in consumers and companies reviewing discretionary spending. – Andre Joubert, General manager MWEB Business
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