Johannesburg – An increasing number of financially-stressed South Africans are turning to debt review, says Neil Roets, CEO of Debt Rescue.

His comments come despite inflation slowing to 6.3 percent in February – from the 6.8 percent seen a few months ago, and the South African Reserve Bank effectively holding the prime lending rate stable at 10.5 percent over the past few months.

Roets says the company has seen a 20 percent growth rate over the past 12 months in clients applying for debt review.

His remarks follow those of Capitec Bank, which on Tuesday noted that applications for debt review grew 19 percent in the year to February, while 15 percent more clients submitted retrenchment letters to the bank.

Capitec notes, in its statement to shareholders, that the “financial stress and economic difficulties experienced by clients during the year were evident.”

The bank, now SA’s third largest, also said there was an increase in clients who received their salaries late or experienced reduced or no inflows. It also experienced clients who wanted to reschedule their loans.

Roets says, based on the substantial increase in those seeking debt review, it is clearly evident that times are tough – and he expected even rougher seas ahead for consumers following the debacle with finance minister Pravin Gordhan.

“This time round it is not just the poorest of the poor but the middle class and the well-heeled who are feeling the pain.

“It is also not limited to a specific age group although the 18-35 old age group is showing a slightly higher rate of distress.”

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Roets adds there has been a higher rate of repossessions of both fixed property and other goods such as motor vehicles this past year than in previous years.

More than 250 families were losing their homes on a weekly basis to sales in execution because they fell into arears with their bond repayments.

Johan Muller, MD of Problem Bond South Africa, said the problem of homes being sold in execution was growing. Specialising in assisting distressed homeowners who are on the verge of losing their properties, he said the situation was dire and getting worse.

“If the unstable political situation in South Africa persists – or is aggravated by the present spat between the finance minister and the president – we expect many more home owners to default on bond repayments with a strong possibility of ultimately having their properties sold out from under them.”

Roets said it was clear that there was no sign of relief for the immediate future.

“Things are going to get a lot tougher for consumers and now is the time to tighten our belts and knuckle down for the financial storm that is going to hit us.

There were a number of major problems looming anyone of which could further derail the economy.

“If things go sour any further between the finance minister and President Jacob Zuma this could lead to downgrades by the three ratings agencies. It could also lead to a massive outflow of foreign investment capital.

The continuous hammering on the subject of expropriation of land without compensation was making this country look more and more like a socialist state that would see investors fleeing in droves leading to massive job losses and further distress for consumers.”

It was hugely important to budget for unexpected expenses and to avoid using high interest-bearing credit and store cards.

Roets said total consumer debt was now standing at almost R1.6 trillion (according to the latest figures released by the South African Reserve Bank).

“A recent World Bank index has also shown that South Africa is one of the most indebted countries in the world.”

BUSINESS REPORT ONLINE