Stark stats about SA’s debt

A total of 77% of unsecured loans across the economy are overdue, as are 23% of vehicle and mortgage loans.

We learn from Transaction Capital’s results for the year to September, that 77% of unsecured loans across the economy are overdue, as are 23% of vehicle and mortgage loans.

These should be frightening figures and show the devastation caused by the lockdown. With SA’s unsecured lending valued at just over R300 billion, and mortgage and vehicle loans at R1.4 trillion, that’s a sizeable proportion of financial sector assets now in distress. Part of this would be accounted for by the repayment holidays extended by the banks at the start of the lockdown in March this year.

What’s also alarming is the plight of the ultra-poor, defined as those living on less than R8 000 a month.

Figures from University of Cape Town’s Liberty Institute of Strategic Marketing show the number of ultra-poor adults has climbed to 77% from 56% of the population in three years.

Transaction Capital’s business – focused around financing and servicing minibus taxis, debt collection and more recently the used car business, following the acquisition of 49.9% of WeBuyCars – withstood the Covid lockdown. For the five years to September 2019, the company delivered blistering compound annual growth of 23%. That trend was interrupted by the events of the last few months with a 66% drop in core headline earnings per share.

Though the poor have been hardest hit by Covid-19, they are also least likely to qualify for credit.

CEO David Hurwitz says collection rates on non-performing loans are back to roughly 90% of pre-Covid levels. “At the start of the lockdown, the banks were primarily focused on providing debt relief.

“We saw very little evidence of customers being handed over to their legal departments, but we expect to see an increase in non-performing loans coming out of the banking sector.

“Our experience is that there has been a rather sharp recovery in customers’ ability to service outstanding loans.”

There are 27 million credit-active consumers in SA, of which almost 40% or 10 million had impaired credit records in June.