85% of South Africans in need of financial help, 55% has no access to credit
CAPE TOWN – At least 85 percent of all South Africans need help either financially, emotionally or both as a result of the Covid-19 pandemic, according to a recent survey by Debt Rescue.
The study found that a further 55 percent required financial assistance but had no access to credit and an additional 96 percent were stressed about their health, finances or both.
Debt Rescue chief executive Neil Roets, who commissioned the poll, said he was deeply distressed by the findings.
He said consumers were heading for a dark place with unemployment at an all-time high and with little to no prospect of a bounce-back in the economy following the devastation wrought by the Covid-19 pandemic.
Due to Covid-19 and the lockdown, many households had to take on debt just to make ends meet. The debt holidays offered by banks at the start of lockdown gave South Africans a breather but also saddled them with an additional R20.7 billion of debt.
Nearly half of those surveyed by the 2020 Old Mutual Savings and Investment Monitor Covid-19 Special Report confirmed their personal financial situation was worse than a year ago.
Head of Old Mutual Rewards Brett Cameron said: “Being indebted can be overwhelming, making families feel they will never be debt-free, but it’s important to remember that success can be achieved by taking a series of small steps repeated every day.”
The Debt Rescue survey found that there had been a rapid increase in the number of deeply indebted consumers in South Africa over the past three months compared to the same period last year.
The 2.8 million jobs lost in the first wave of results in April, according to Statistics South Africa did not bounce back by June even as the Covid-19 lockdown eased and more of the economy opened up, taking unemployment to lows not seen before.
Debt Rescue said it was likely that, at an expanded level, joblessness was now at more than 50 percent with youth unemployment estimated at 70 percent.
Roets said the spike in the number of applicants seeking to go under debt review was probably one of the best indicators of how profoundly the virus had impacted South Africa’s working men and women.
“Since June we have seen a spike of 54 percent a month in in the number of indebted consumers applying for debt review.
“The so-called payment holidays granted to consumers by a number of financial institutions including most banks have also had a very negative impact causing loans to balloon to the point where many consumers were unable to repay them,” Roets said.
The one ray of light on an otherwise dark horizon has been a substantial decrease in the fuel price. Unaudited month-end fuel price data released by the Central Energy Fund indicate that the price of diesel could drop by as much as 93 cents a litre.
The decreases to the prices of all four fuel types are despite the rand weakening in recent days relative to the US dollar.
Roets said: “One great thing that we have in South Africa is our excellent debt relief legislation in the form of the National Credit Act that controls the process of debt counselling.
“This allows deeply indebted consumers to repay their loans over a longer period of time in smaller instalments whilst enjoying the protection of the Act. Once in place debt collectors are prohibited by law from attaching the property of the person under debt review.
“In some instances creditors are even prepared to reduce the total amount payable which provides further relief to consumers.”
Officially, SA’s jobless rate fell in the second quarter to 23.3 percent from 30.1 percent, Statistics South Africa (StatsSA) said. But since the economy contracted 51 percent in the period, that does not seem possible.