The impact of any increase in taxes, whether related to consumers or small businesses, will be equally hard hitting considering the levels of distress already experienced by both, according to Experian South Africa
Jaco van Jaarsveldt, head of commercial strategy and innovation at global organisation said what was more concerning was the fact that the self-same individuals in the most affluent Experian Financial Affluence consumer segments (FAS), i.e. the Luxury Living and Aspirational Achievers, whom make up roughly 13% of the total credit active population in South Africa, were the owners and directors of a large proportion of small business in South Africa-thus exposed on both fronts.
He said that when looking at the current financial state of consumers in these two Experian Financial Affluence Segments, it was clear that they were hardest hit by the dual impact of both interest rates and high cost of living.
“Considering the fact that these two segments hold roughly R1.8 trillion or 80% of total outstanding debt in South Africa due to their high exposure to secured lending products i.e. home- and vehicle loans, any increases in personal or business tax rates will just add to the pressure they are already faltering under,” van Jaarsveldt said.
The company said the Luxury Living and Aspirational Achiever FAS categories contributed a large portion of the South African tax revenue and were already severely distressed. It said this was evident when looking at the rate of increase in the Experian Consumer Default Index (CDI), which measured the sum of first-time defaulted balances, i.e. accounts that have never previously defaulted, as a percentage of the total sum of balances outstanding.
“The Experian CDI deteriorated by 62% for the Luxury Living Group and 14% for the Aspirational Achievers Group when comparing 22Q4 to 23Q4. The remaining four Experian FAS Groups, i.e. Stable Spenders, Money Conscious Majority, Labored Living and Yearning Youth increased by low single digits or decreased marginally during the same period. Of even greater concern is the fact that requests for debt review for the Luxury Living and Aspirational Achievers groups increased by 18% and 41% year-on-year respectively between 22Q4 and 23Q4.”
Van Jaarsveldt said the South African taxpayer was already struggling to make ends meet with the high interest rates and cost of living. “Increasing taxes to consumers and business owners will add additional pressure resulting in more defaults and business closures which is not supportive of any plan to drive economic growth and higher employment.”
Nedbank CIB Research Analyst Reezwana Sumad said on Wednesday morning, the USDZAR was currently trading at 18,8850, the EURUSD at 1,0815 and the GBPUSD at 1,2630. She said the possible trading range for the rand today was 18,7000 to 19,1000. “The local market focus will be on the CPI data to be followed by the SA Budget. The markets are likely to remain exceptionally cautious ahead of these events, and after them, the price action is likely to be volatile,” Sumad said.
PERSONAL FINANCE