There has been a significant increase in South Africans in need of debt counselling as high interest rates, and below-inflation salary increases are taking their toll.
This is according to DebtBusters’ Benay Sager, who told SABC News that the company saw an over 40% year-on-year increase in queries for debt review in January.
“I think that’s driven by a few things. One is that last year was probably the most difficult financial year for South Africans, at least in the last 15 to 20 years,” he said.
He pointed to high inflation, particularly for food, electricity, and petrol, as a significant factor weighing on South African consumers.
Combined with high inflation are high interest rates and load-shedding’s impact on small businesses, he said.
“There hasn’t been any growth in terms of jobs and people’s salaries. All of those things really impacted a lot of consumers, and we’ve certainly seen a significant increase in January,” he said.
Sager added that he expects to see the same for the rest of 2024.
In particular, South Africa’s middle class is under severe strain from interest rates, as defaults on home loans have increased significantly over the past 18 months.
This is feedback from Experian Africa’s head of commercial strategy, Jaco van Jaarsveldt.
Van Jaasveldt told 702 that the total value of outstanding credit in the South African market is roughly R2.16 trillion – R1.16 in secured lending products and R1 trillion in home loans.
In addition, only 12% of South African credit-active consumers have access to that type of debt. Therefore, 80% of unsecured lending debt sits in the hands of 12% of the credit-active population.
He said Experian’s Consumer Default Index has deteriorated significantly over the past 18 months and can be seen as an accurate measure of consumer distress.
The Index looks at people who have defaulted beyond three months delinquent for the first time.
There has been a 70% year-on-year increase in these defaults among the most affluent segment of the market. “That is purely because of interest rates and secured lending exposure,” he said.
The World Economic Forum’s (WEF) Future of Growth report recently revealed that South Africans are getting poorer as the country’s population grows while its economy stagnates, meaning there is less money to go around.
The report showed that South Africa’s economy is not competitive on the global stage, as it is below average on three of the four key indicators that the WEF considers vital to economic prosperity.
Of particular concern is how the country’s economic growth has failed to keep up with its population, making South Africans poorer.