Borrowing money has become a lifeline for millions of South Africans

By Suthentira Govender

South Africans are increasingly turning to credit to survive cost-of-living increases.

This is according to Debt Rescue CEO Neil Roets, who analysed the “Eighty20/XDS Credit Stress Report” for the last quarter of 2022 to raise awareness during National Credit Education Month in March.

The quarterly report highlights the impact of economic forces on the South African consumer, with particular focus on consumer credit behaviour.

The report shows there is an increasing appetite for credit among South Africans with more than 800,000 new entrants into the credit market in the fourth quarter of 2022 — the highest since the Covid-19 pandemic. 

The report states the mass credit market segment has seen their credit card balance balloon by R2.5bn last year, an increase of 23%, indicating increasing reliance on credit for everyday purchases.

It also shows there is also a significant percentage of the 1.3-million credit card holders moving into default in the last quarter of 2022, with a 34.5% increase in credit card loan value newly in default.

“These statistics show that South Africans are increasingly turning to credit to survive the relentless onslaught of cost-of-living increases that seemingly have no end in sight,” said Roets.

“Against this backdrop of desperation, the news from Statistics SA that annual consumer price inflation shot up to 7% in February 2023 — up from 6.9% in January 2023 — as a result of food price inflation climbing even higher, is devastating. 

“It is significant that food and non-alcoholic beverages climbed by a whopping 13.6% year-on-year, and contributed 2.3 percentage points to the total CPI annual rate of 7% — highlighting the plight of consumers whose very survival depends heavily on these basic goods.

“During National Credit Education Month, it is pertinent to highlight the most important right consumers should demand: a stable economy where all South Africans can prosper, and a stop to the relentless cost-of-living increases that are decimating people’s lives.

“The sad fact is that nobody seems to be listening any more.

“South Africans are fighting a daily battle to simply survive in the face of a cost-of-living catastrophe the likes of which we have never seen before.”

Roets said the energy crisis, relentless petrol price, interest rate hikes and the constant price increases of staple foods “have pushed consumers’ backs against the wall and left them with nowhere else to turn but a bottomless pit of debt”.

“The elephant in the room is, of course, the many millions more who are not credit-compliant and are simply hanging on by their fingernails.”

The latest statistics shared by the Pietermaritzburg Economic Justice and Dignity Group (PMEJD) show more than half (55.5%) of South Africa’s total population — amounting to 30.4-million people — are living below the country’s upper-bound poverty line of R1,417 a month. 

Added to this, more than a quarter (25.2%, or 13.8-million) are living below the food poverty line of R663.

“In the face of this scenario, it goes without saying that consumers can simply not afford any more price shocks — and considering the impending 18.65% increase to electricity rates in April, the expected repo rate hike at the end of March and the anticipated petrol price hike next month, it is clear that the country is at a tipping point and heading for a catastrophe the likes of which we have not seen before.”

Roets said while consumers have more debt per credit agreement, they are seeking help sooner when defaulting on their debt.

“My advice to those who fall into this trap is to seek help from a registered debt counsellor, who can assist them to manage their financial predicament. This has been a very successful solution for thousands of consumers who are plagued by over-indebtedness.”

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