Nothing beats spending like an American in Africa...

A frustrated finance minister has lambasted South African consumers for not saving enough while spending like there was no tomorrow.

Finance Minister Trevor Manuel said that South African consumers were heavily indebted, mimicking the pattern of unsustainable American consumption spending.

“They live on debt and are highly leveraged. It is not a basis of stability. If they are borrowing for consumption then there is something wrong in the equation,” said Manuel.

Manual, one of the world’s longest serving and most respected finance ministers, added that price stability of 2 percent was preferable, and was needed to ensure that those relying on a fixed salary were not hit by rampant inflation.

Inflation is currently at 11.6 percent, way above the 3-6 percent band mandate of the reserve bank. The bank has raised its prime lending rate by 500 basis points to 15.5 percent since June 2006, when the tightening cycle started.

However, Manual said that “the response to rate increases is abysmally low,” adding that while a 25 basis point increase in Europe meant an immediate curtailment in spending, this was not the case in South Africa.

He added that up to a 700 basis points increase has been required in the past “before [consumers] bite”.

“People are tying themselves into knots ... if people live on debt we find ourselves with a problem,” he said.