South Africans are debt slaves
Many people feel under pressure to ‘keep up with the Joneses’.
Many people feel under lots of pressure to ‘keep up with the Joneses’.
According to the National Credit Regulator (NCR), South Africans are over-indebted – and still clamouring for more credit. Statistics released on Friday show the total value of new credit granted in 2019’s first quarter (Q1), increased by more than 5% to over R134 billion in Q2, says the NCR’s Ngoako Mabeba.
Mabeba says one million applications for new credit were made, with 55.44% turned down.
He adds that there are 25 million active credit consumers, and 10.23 million (40%) are behind on their payments.
“There is impairment on at least one of their accounts,” he says, adding that on average a consumer has three-and-a-half accounts.
“There are 80 million accounts in South Africa, with 21 million in arrears by three months or more.”
Mabeba adds that 12.7% have adverse listings against their names, while 5.1% of consumers have judgments and administration orders against them.
Reasons
So why do consumers keep adding to their debt?
According to Dr Azar Jammine, chief economist at Econometrix, credit providers lure consumers into taking credit.
“Credit providers try and entice people who are not able to buy things to do so,” he says, adding that many South Africans feel pressured to “keep up with the Joneses”.
“In South Africa, there are advertisements for expenditure on all sorts of items such as durable goods and electronics.
“A large amount is being spent on cellphones and data, which was previously not an expenditure item in people’s lives,” says Jammine.
He adds that many find themselves in debt because they lack financial education.
“Unfortunately, many in South Africa are [financially] illiterate.
“They are enticed into these things because they think it is a way of uplifting their wellbeing – and they are not fully aware of the consequences because they are not spelled out to them.”
Stagnant economy
The slow economy is also contributing to consumer appetite for debt, says Jammine. “The main problem is that the economy is not growing rapidly. “More and more people are becoming unemployed and are under a lot of pressure, yet they are still trying to sustain their living standards, and they must then borrow money if they want to sustain those living standards.” He says an over-indebted country eventually harms its economy. “The consequence of indebted citizens on the economy is that eventually you have less buying power in the economy.”
The economy is not growing rapidly
Reality survey
A 2019 financial reality survey by DebtSafe indicated that many of the 1 020 participants were indebted due to:
Tough economic times, so they can’t afford basic necessities (67%).
Education and school expenses for themselves, children and other relatives (38%).
Unforeseen circumstances (29%).