Financial warning: South Africans urged to tackle debt as Budget Speech approaches

With Finance Minister Enoch Godongwana set to deliver his much-anticipated Budget Speech on Wednesday, South Africans have been urged to revisit their finances as rising debt levels continue to put households under pressure.

The budget was postponed two weeks ago after members of the Government of National Unity (GNU) rejected Godongwana's proposed 2% increase in Value Added Tax (VAT), raising concerns that an increase could put more financial strain on ordinary South Africans.

The proposal also faced widespread criticism from opposition parties. Jacob Zuma's MK Party has threatened to bring the country to a standstill if the minister proceeds with the VAT hike.

While Advocacy group Black Sash has accused Finance Minister Enoch Godongwana of "using" the SRD grant as leverage to gain acceptance for a VAT hike after the minister said there would be no need for a VAT Increase if the SRD grants are reduced.

The government has been struggling to pay for frontline services such as teachers and doctors and had hoped the increase would help ease the financial strain.

South African households are grappling with growing debt. According to recent data, household debt stood at 40.7% of the country’s nominal GDP by the end of September 2024.

Salem Nyati, a Consumer Financial Education Specialist at Momentum Group, believes now is the time for consumers to take a hard look at their spending habits.

“Our lives are not static, and our financial needs and priorities evolve as we journey through life. From time to time, you will need to go back to the drawing board to redesign a budget that accommodates your current circumstances.” Nyati said.

Nyati advised that consumers should focus on paying off high-interest debt first—especially credit card balances, which can quickly become overwhelming.

She also suggested that consumers explore options like debt consolidation or refinancing to make repayments more manageable.

 “If you are spending more than you’re making – either through credit or loans, your personal budget will be in deficit and this needs to be addressed.

“Prioritise paying down high-interest debts first, such as credit card balances, as this will help you tackle financial strain. You can also explore options such as debt consolidation or refinancing, which may see you benefit from lower interest rates. Setting aside a portion of income for savings can provide a buffer for unexpected expenses, helping prevent future budget deficits.” Nyati said.

Nyati added that consumers should take a cue from government spending priorities by aligning their finances with their long-term goals. With economic uncertainty on the horizon, Nyati has encouraged South Africans to seek financial advice where needed and to start making smarter financial decisions.

IOL News