The increase in the value-added-tax rate to 15% in April has South Africans tightening their belts a little more, but overall the economic mood is lifting and opening the door to improved sentiment and business confidence.
“The remainder of the year should be more positive from an economic perspective, but consumers will still have to grapple with the added cost of the new VAT rate,” says Dr Nolwandle Mgoqi-Mbalo, Head of Standard Insurance Limited.
She adds that consumers need to remain alert for risk events, especially the possibility of heightened incidences of theft, which may affect their property and assets in this environment.
Adding to the VAT increase, is the 22c/litre increase in the general fuel levy and the 30c/litre increase in the Road Accident Fund levy, which has added an overall 52c/litre to the price of fuel.
“It is important that consumers ensure they continue to protect their households, vehicles and other assets by being careful and, at the same time, not being tempted to cut back on insurance to make up for higher monthly bills.”
She adds: “We are not out of the woods yet and consumers need to ensure they continue to manage their short-term risks carefully as tax increases begin to bite. South Africans remain burdened with high debt as in the face of additional costs it is imperative that consumers look after their futures.”
Individuals remain under immense pressure. In particular, collections of personal income tax continue to underperform as a result of lower bonus payments, moderate wage settlements, continued job losses and stabilisation of overall public-service employment.
“It was inevitable tax increases would come and it is now very important for consumers to manage the consequent risks,” says Mgoqi-Mbalo, suggesting that a key way to navigate the current economic conditions is to be practical with expenditure and shop around for the best deals.
“It is a time to be prudent but also to ensure you are not left in the lurch when something unexpected happens in your life. Insuring your assets, for instance is now more important than ever, as the monthly premium, in many instances, is a drop in the ocean versus the replacement value of personal property and other goods.”
Asking the right questions prior to signing up for a policy is another way to avoid challenges and disappointment down the line.
“You could, for instance, save by bundling policies with one provider, or by discussing additional safety and theft prevention measures to ensure lower premiums,” explains Dr. Mgoqi-Mbalo.
Another option could be to investigate increasing deductibles – the amount you pay out of your own pocket in the event of an insured loss – as this can reduce premium costs for those facing a cash crunch.
“However, remember cheaper isn’t always best. It is important to shop around and compare quotes – and not to just look at the price but ultimately what you are covered for and related variables in the event of an insured event actually taking place.”
She advises consumers to look for additional ways of saving, like low mileage discounts and the reduction of optional insurance on old cars.