JOHANNESBURG - This Black Friday should be renamed Red Friday for South Africa.
In the world of finance the term “in the red” describes being in debt or losing money, the phrase “in the black” describes being solvent or accumulating money.
While Black Friday approaches, the country's balance sheet is in the red.
South Africans tend to be optimistic by nature, however, as 2020 approaches there is general feeling of trepidation in the air in the knowledge that the country, homes, businesses and the public sector, have to tighten spending. It is no longer something that can be put off.
Last year around this time South Africa was still riding the sputtering Ramaphoria wave. Eskom wasn't failing as badly as it has this year .
Last year I indulged on Black Friday and bought my first Smart TV with a large screen.
But this year I intend to go with the lipstick index and buy a little something to feel happy on Friday, comfort spending and the psychology of materialism aside.
The “lipstick index” is a term lauded by Leonard Lauder, the chairman of Estée Lauder, a cosmetics firm, in the 2001 recession. In the autumn of that year, lipstick sales in America increased by 11 percent.
The economic realities our country faces is scary.
Repeated warnings by rating agencies, Moody's and S&P Global as well as the International Monetary Fund (IMF), to curb spending and to get our fiscal house in order cannot be ignored.
A report issued by the IMF on Monday following a recent research mission predicted that on current policies, the medium-term growth outlook would remain subdued, accompanied by muted inflationary pressures. It said an increase in the working-age population was projected to exacerbate unemployment, poverty and inequality.
S&P Global Ratings downgraded South Africa’s outlook to “negative” from “stable” on account of the growing debt burden, upwardly revised fiscal deficits and low gross domestic product growth.
South Africa needs to get its house in order soon.
Less economic growth, leads to less investment and less jobs. People who have very little end up with less.
Alarming statistics were released on Wednesday by Experian South Africa, which showed that consumer debt in South Africa increased to R1.72 trillion. It said that this was mainly due to an overall deterioration in first-time defaulters specifically across unsecured banking products such as credit cards and personal loans.
It said personal loans showed the biggest increase year-on-year (y-o-y) from 8.03 percent in 2018 to 8.84 percent in 2019 of first-time product defaults amounting to R6.2 billion.
First-time credit card defaulters similarly increased from 6.58 percent to 6.63 percent y-o-y amounting to R2.2bn in balances defaulting for the first time since opening.
Adding to this morose picture is the warning by the Credit Ombudsman.
It said, "We have all been receiving the e-mails. We’ve added to our ‘Wishlist’ and even have first preference on all ‘early bird’ specials, just so we don’t miss out on all the wonderful Black Friday specials. Even if we want to avoid the ‘Black Friday’ euphoria, it is hardly a frenzy that we can ignore."
It said statistics from the National Credit Regulator showed that that for the quarter ended June 2019, credit facilities, which consist mainly of credit cards, store cards and bank overdrafts increased from R20.26 bn to R21.11bn -a quarter on quarter increase of 4.1 percent, while in December 2018, with Black Friday and Cyber Monday there was a quarter-on-quarter increase of 15 percent.
It warned that, "We should be proactive and not find ourselves being in the usual corner of "Janu Avenue and Worry Street".
With South Africa's unemployment rate at its highest in over a decade, with more than 6 million people unemployed, it adds to the average South African's insecurity that there is not that much work out there to be had.
For the middle class, it is a job away from hitting the hard times. It can take months to be re-employed.
The public wage talks by Eskom and SAA this year demonstrate what an impossible task Finance Minister Tito Mboweni faces in getting public servants to do their bit in tightening the fiscal belts. Both parastatals have zero money, yet in the face of unrealistic labour demands employees still get an increase.
This is in stark contrast to employees at businesses this year, who on average are not getting an inflation rise this year due to the rough economy.
There is a growing silent disconnect to the expectations of workers in the businesses sector vs the public sector.
Labour cries foul at executive remuneration. While this bone has been mauled over and there is no denying that it in a huge problem both in all spheres, there needs to be more of a middle ground on expectations
So as we face Black Friday, it may be an idea to count the cost of how we spend money or we are in danger of putting lipstick on a pig.
Philippa Larkin is the content editor for Business Report.