In an August 14, 2007 review of consumer indebtedness in South Africa, the market research firm Euromonitor (London) said that the South African Reserve Bank (SARB) was increasingly concerned about increases in consumer debt. The review was posted on Euromonitor's website.
The review began with, "Consumer debt is growing at an alarming pace in South Africa, driving inflation upwards. Attempts by the South African Reserve Bank to bring consumer debt under control will dampen consumer spending, but are necessary to keep economic stability." Euromonitor said that in the first quarter of 2007 consumer debt was 76.0 percent of disposable income compared with 47.6 percent in 2003.
Consumer debt has an obvious, negative effect on inflation. The rate of inflation was 6.4 percent in June 2007 compared with 4.6 percent in June 2006. This rapid rise in the rate of inflation is the central reason for the SARB's concern. The SARB raised the basic South African interest rate by 2.5 percentage points in one year. The rate was increased from 7.0 percent in June 2006 to 9.5 percent in 2007.
"Another measure designed to make borrowing more difficult," said Euromonitor, "was the June 2007 introduction of regulations requiring credit...