As fewer clients canceled policies, Liberty Holdings turned to profit and contributed to the banks solid performance in a generally weak banking environment. A much needed contribution that has boosted results in comparison to the competition banks, Nedbank and ABSA.

CEO, Jacko Maree commented that Standard Bank remained committed to the long-term growth plan for its emerging markets franchise despite the uncertainty surrounding world markets. There is an expectation in 2010 that nearly half of the worlds Gross Domestic Product Growth will originate in the emerging markets, giving substance to Standard Banks Growth plan in areas such as; Brazil, Russia, India and China.

The groups headline earnings, surged 11% to R5.9 billion in the first 6 months to June and according to Sim Tshabalala ; “The positive results reflect the resilience of the bank’s infrastructure, where we are currently leveraging off previous investments in information technology, footprint and trained staff.”

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There have been certain capacity constraints and delays in the magistrate’s court due to uncertainty around the interpretation of the National Credit Act. Some of the magistrates have even refused to take on Debt Review matters as they do not have enough expertise in the matter.

The National Credit Act came into effect in 2007, since then there have been 180 000 consumers that have applied for debt counseling in South Africa. Due to the fact that a court has to review the debt review application there is a serious bottleneck in the process.

According to the debt counselor and Director of Octogen, Paul Slot there is a standard methodology that is needed for the application process. “We need a methodology where the credit provider agrees with the review by the debt counselor even before it goes to court”.

The reality of the situation is that the quicker the courts are able to rule on the debt review application, the quicker the indebted consumers are able to rehabilitate themselves. This rehabilitation has to be the end goal of the debt review process as the rehabilitated customer will now become an asset to the South African economy once more.

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Unemployment has risen from 25.2% in the 1st quarter to 25.3% in the 2nd quarter according to statistics South Africa. Analysts are worried that these job losses may curb consumer spending for the rest of the year and negatively influence the retail market.

“I expect low single-digit real growth for the rest of the year.” Said Shanay Narsi a BOE Private Client Equity Analyst. This could indicate that the World Cup may have spiked the retail sectors earnings for the 2nd quarter, however going forward into the 3rd and 4th quarter the management of this drop in consumer demand may determine how profitable a year the retail sector has.

According to Roger Tejwani; the second installment of retail’s growth should be employment driven in order to avoid the effects of the inevitable world cup hangover. Factors which may add to the headache are the recent labour strikes- meaning that a cut in pay would further curb consumer spending.

Pick n Pay have indicated that although the world cup has added to their bottom line in the second quarter, with a large increase in World Cup related goods; the group’s revenue growth is still weak. Consumers have not started buying up once more.

Another industry to bear some of the brunt of an increased unemployment rate is that of the retail credit sector. With more people unemployed, it would reasonably follow on that there are more people under debt review and more consumers who no longer qualify for credit.

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Many people have advocated the need for greater financial education amongst consumers, as well as a need for greater spending responsibility from breadwinners. One expert has argued that there are more drastic steps which need to be taken in terms of which consumers are offered savings accounts that are not directly accessible and will weather the storm of impulse.

An economic expert- Neil Lightfoot, has argued that there is a need for analysis of behavioral economics within our country’s borders, allowing us to determine the behavior of South African Consumers and develop a savings product which takes all of these factors into account in order to guard against the “leaky savings bucket.”

Many South African Insurance houses will agree with Lightfoot’s analysis as they have observed consumers calling in pensions, insurance and savings policies as the pressure of a weakened economy took its toll.

According to Neville Melville, the head of the National Regulator’s task team, consumers have opted to exploit the very process designed to help them.

“Rather than paying their debt, people bought large screen TV’s during the World Cup, or we have seen people buying an up-market car and then immediately going into debt counseling,” said Melville. “The unscrupulous have exploited the openings…”

At the moment there is no stipulation which guarantees payment plans or any prescribed benchmarks regarding the debt restructure process.

The absence of a uniform system which governs an indebted consumer’s entrance into debt-review has led to debt-counselors dreaming up radical repayment plans for their clients. In doing so, they have adversely affected the intended outcomes of the debt review program and further entrenched the debt crisis in South Africa.

Marcus added that by keeping prices steady and fighting against inflationary increases the reserve bank is providing a platform for many of the poorer households to save money and to plan for their future.

Currently the household debt to annual income ratio has decreased slightly to 78.4% in the first quarter of 2010. However this figure is still too high and further measures need to be taken. Marcus said that a higher savings rate should not only be the concern of the nation, but rather that it should become a priority for all families who have a little to put away each month.
By guarding against inflation, “We are providing the insurance no other insurer can hope to provide, and that is to the poor and low-income earners of South Africa. What we are doing is to protect their small amount of resources by making sure that they still have the power to buy or can afford to buy with their money.

This is the best gift that a government can give to its people,” concludes Marcus.

This statement was released by Minister of Transport S’bu Ndebele last week on the back of a statistics released by the Democratic Alliance (DA) that showed about 65% of the 8.5 million vehicles on South Africa’s roads are uninsured.

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It also warned that central banks should not wait too long to raise borrowing costs as the side effects from measures put in place to combat the current global recession might well be the cause behind the next financial crisis.

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‘Following an 18-day strike that crippled exports, state transport company Transnet last week agreed to raise wages by 11 percent, more than double the rate of inflation. Now, 1 million state employees are threatening action during the month-long tournament that starts on June 11 unless they receive similar increases. Mediation efforts will resume this week.’

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