Disturbing borrowing trend among debt-ridden South Africans

Household net worth on decline

DEBT-STRESSED South Africans are not borrowing to buy assets but to consume, Rod Salmon, a retail and consumer analyst at Barclays Africa, told the Absa 2017 Consumer Conference in Cape Town this week.

Salmon said the country was decoupling from global growth, while household net wealth was declining.

“We have some sort of self-inflicted things that we have done to ourselves, which has resulted in household net wealth declining – R28 billion extra taxation is not going to offset the small amount of interest rate declines we’ve had, even if there is another one, and more taxation is still likely.

“Government employment is also set to fall, because we just don’t have the money to continue to grow employment.”

Salmon said Professor Haroon Bhorat had told the conference that about 4.8 million jobs were created between 1995 and 2015, but 7.6 million people had been added to the labour force.

“He (Bhorat) talks about manufacturing being key for moving to a higher-growth, more-developed economy and income growth in the lower- and higher-income group, but not in the middle-income group (58% of the labour force), while there is no short-term fix for sustainability in growth, and the education system has not changed.”

Salmon also referred to a presentation by Professor Carel van Aardt, which stated that lower-income consumers have less debt, but higher repayments, which was the main reason for defaults.

Salmon said the economy would grow at a slower rate, urbanisation would continue, competition would be more global and increase, and technology would change the retail and manufacturing sectors.

Dr Alan Treadgold, a retail sector specialist, said via a video link from London, in his presentation on future retail trends and issues facing South African retailers, the country was in the early stages of a massive disruption in the sector.

Treadgold said drivers of disruption included consumer transformation, competitor disruption and technology transformation.

He said technology transformation included the personalisation of everything. –