SA recession could mean bad loan spike

South Africa could experience a spike in bad loans as the first recession since 2009 hits millions of chronically indebted consumers struggling to pay back credit totalling R1.7 trillion, the National Credit Regulator (NCR) said yesterday.

SA slipped into recession in the first quarter, compounding a slew of negative economic indicators, including sovereign rating downgrades and stubbornly high unemployment.

“Already, we’ve got a lot of accounts, more than a third, that are impaired and the percentages might go up. So we are worried,” said Nomsa Motshegare, NCR CEO. “There must be responsible borrowing but also responsible lending.”

Motshegare said that at the end of December, there were about 24 million active credit consumers, with 40%, or just under 10 million people, having some form of “impaired record” of payment.

Unbridled lending fuelled a consumer frenzy that lifted growth to an average 5% annually in the period before the 2009 recession, before the government introduced legislation clamping down on irresponsible lending.

National Treasury, which has previously introduced a debt amnesty to assist poor and indebted consumers, said it is considering a number of options, including “extinguishing” some or all debt to help people get a fresh start.

Katherine Gibson, senior advisor for market conduct and inclusion at Treasury, told parliament’s trade and industry committee further research was needed to determine the impact of possible debt relief packages.