Johannesburg - South African furniture retailer JD Group on Monday sharply increased the amount of money it sets aside to cover bad loans, the latest sign that soaring personal debt is squeezing banks and shops in Africa's top economy.
JD Group, which sells beds, sofas and electronic equipment to massmarket customers who often buy on credit, also reported a 10 percent drop in full-year earnings and said it expected the strain on shoppers to continue.
Rising food and fuel costs and slow economic growth are making it difficult for many South Africans to pay back their loans on time. One in every four South Africans is unemployed and the number of borrowers with impaired credit records - three or more payments in arrears - has risen to nearly 50 percent.
“Management's view is that the over-extended consumer and challenging trading environment will continue into the foreseeable future,” the company said in a statement.
JD Group said it lifted its bad debt provisions on its loan book - the money it sets aside to cover defaults - to 966 million rand ($95 million) from 557 million last year.
JD Group, which is about 50 percent owned by South African furniture maker Steinhoff International, said headline earnings per share totalled 395 cents in the year to end-June, from 441 cents a year earlier.
The company kept its dividend at 232 cents a share.
Shares of the company were up 3.3 percent, outperforming a 0.3 percent rise in the broad All-Share index. - Reuters