By Petronella Sibeene
Namibia Financial Institutions Supervisory Authority (Namfisa) has advised consumers to cut their spending on non-essential items as all income earners regardless of bracket would face severe financial pressure this year.
Namfisa Corporate Communications Officer, Ebben Kalondo, yesterday told New Era that low-, middle- and high-income earners in the country are likely to face psychological pressure related to financial matters.
The situation is fuelled by high interest rates.
Local economist, Martin Mwinga, who is the Chief Executive Officer of RMB Asset Management, says the Namibian Consumer Price Index (NCPI) continued to accelerate in 2007, on rising food inflation. Annual food inflation stood at 13.52 percent in October last year.
Food inflation is likely to continue its upward pressure during 2008, but is expected to ease gently towards the end of the year.
The high food prices are a result of the global demand for wheat products and higher domestic interest rates.
Personal disposable income is likely to remain under pressure this year.
Kalondo says individuals who are debt-ridden are likely to struggle in settling their accounts and are advised to take steps to survive through this year.
“Budget and see where to cut and shop wisely. Also learn to compare prices,” Kalondo advised.
The interest rate in the country has in the past two years almost gone up seven times and according to Kalondo, it is unlikely that it will slow down to the expected target of between three and six percent.
Consumers are further urged to set up a budget to determine what they need in order to survive.
The general trend has been that most people spend more than they earn and as a result most are debt-trapped.
Because of the tough days to come, Namfisa says individuals could trade in expensive cars for cheaper ones that are easy to maintain and run.
In the same way, those incurring debts such as school fees and those that buy household essentials such as food on credit, are advised to settle these accounts promptly.
Kalondo also said Namibians should go through their transaction history such as bank charges and insurance premiums. This will help determine how much they spend and to what extent they can cut some of these expenditures.
As an example, Kalondo said individuals who bank electronically could alternatively ask for a fixed monthly bank fee than using automatic teller machines that charge every time one uses them.
“People should start exercising their rights and learn to ask the service providers what options are available,” she added.
Most people in the country lack a culture of saving, something Kalondo sees as a bad habit. She says it is time Namibians started asking for advice from financial planners.
“People should learn to put aside money for emergencies so that if there is a problem they do not need to go to micro-lenders. Cut on entertainment costs.
“There are some people who go to shebeens and buy four beers for friends just to show off, if only they could save that little (for the rainy day),” she said. Kalondo advises that in situations where people need to borrow money, they should seek financial guidance on the repayments and what the conditions of the loan involve.
“Remember loans cost money. You should understand how much interest is involved and also how you will repay,” she said.
She added that borrowers should only receive loans if they can repay within their means.
It is advisable to compare interest rates and avoid repaying the loan over a long period, as that is costly, Kalondo warned.
“Plan your repayments before applying for credit. Adjust your savings plan during this period and ensure that you understand the terms and conditions of the loan,” she said.
She emphasised that people should never take credit to settle another account. Rather, speak to the debtors about your situation and express willingness to service your debt.
Namibians seem to be afraid of exercising their rights and rarely ask questions where they might not be clear. Namfisa says people should never sign blank documents as that could be risky.
On a lighter note, yet important, Kalondo urged parents to teach their children the value of money.
“Most kids do not respect and understand the value for money.
“They do not know that money is earned through hard work. It is time parents told their children about the financial situation in their homes in order to create harmony,” she advised.
She added, “All I can say is good luck, tighten your belt and talk to creditors.”