Strangled economy

SIR — It took a biscuit factory owner/manager (Simon Mantell: Five reasons short-term debt is strangling SA’s economy, July 27) to expose the alarming rise in unsecured lending in this country. This is the work SA’s financial journalists should be doing.

A week or two ago there was a passing reference in Business Day to the fact that mortgage lending in SA in the first quarter of this year had dropped by 0,79% to R24,563bn (year on year) while unsecured lending was 31% higher at R21,949bn.

We are very close to a situation (any bets it will be this quarter?) where banks and financial institutions will grant more money for unsecured consumption expenditure than for asset-building mortgage finance.

Earlier, generations of young people, used the availability of mortgage finance to create long-term wealth for themselves and their families. We are heading towards a situation where the current generation of young people will build not assets, but instead be slaves to their debt. It reminds me of the saying: he who doesn’t understand interest pays it; he who does, earns it.

And yet the other day the MD of one of the largest suppliers of unsecured credit was quoted as saying that “unsecured credit allows people to raise their standard of living”.

All I can say to Mr Mantell is: Simon, you biscuit.