Trump victory could hurt indebted SA consumers - expert

Trump’s uncertain policy stance will upset the establishment in Washington to the point that nobody knows exactly which direction he will follow, said Debt Rescue CEO Neil Roets in a statement on Wednesday.

Roets said this would bring profound uncertainty to financial markets including financial markets in South Africa.

The rand has been on a roller coaster ride in the last 12 hours, starting at a year-low of R13.18/$ in early trade, then reaching a high of R13.80/$ at around 05:00 and then rebounding to R13.55/$ by 12:30.

“There is nothing that markets hate more than uncertainty and the Trump victory will have a substantially negative effect on international markets, which will in short order manifest themselves in our marketplace,” he said.

“While the Trump victory may bring about a brief spike in markets, it will in short order be followed by a substantial drop because he is such an unknown quantity, which once again brings uncertainty to the marketplace,” Roets said.

“We can only guess at the ripple effect his election is going to bring to the world economy, but none of it is going to help deeply indebted consumers in South Africa to catch a breather,” he said.

However, Roets said a bigger problem was the announcement by ratings agency Moody’s that South Africa’s big four banks will see a rise in problem loans in the next 12 to 18 months as the economy struggles to grow.

“This problem has been a long time in the making as South Africa’s very low growth rate and growing unemployment has put growing pressure on consumers who are defaulting on their loans at near-record a levels,” he said.