CRI­SIS… WHAT CRI­SIS?

Finweek English Edition - - Economic trends & analysis - GARTH THE­UNIS­SEN

THERE ARE ES­SEN­TIALLY two views of South African house­hold debt: one pos­i­tive and one neg­a­tive. Ad­dress­ing the neg­a­tive view first, you could eas­ily be led to be­lieve that con­sumer debt is ap­proach­ing cri­sis lev­els.

Con­sider year-on-year growth in non­per­form­ing credit card debt, de­fined as debt pay­ments that are in ar­rears for three months or more. Non-pay­ment surged 71,5% in De­cem­ber 2006, thanks largely to the 2% rise in in­ter­est rates last year. Growth in non-per­form­ing mort­gage debt also rose 18,5% year-on-year in De­cem­ber 2006. Fo­cus­ing on the growth side of con­sumer debt cer­tainly paints a grim pic­ture of house­hold fi­nances.

How­ever, there’s an­other way to look at all this. Non-per­form­ing credit card debt – where pay­ments are in ar­rears for three months or more – cur­rently stands at just 5% of all out­stand­ing credit card debt in the econ­omy. That’s still bet­ter than the 7,7% av­er­age for that vari­able since 2001. By the same to­ken, non-per­form­ing mort­gage debt ac­counts for just 1,9% of all out­stand­ing mort­gage debt – also bet­ter than the 4,1% av­er­age since 2001.

Viewed in that light, con­sumers are hardly fac­ing the “mount­ing debt cri­sis” be­ing trum­peted by much of the fi­nan­cial press.

NON-PER­FORM­ING LOANS... NOT YET AT CRI­SIS LEV­ELS

Source: Stan­dard Bank Group, SARB

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