SA households sitting with high levels of debt in wake of Covid-19 pandemic
Cape Town – The Covid-19 pandemic has left many South Africans with high levels of household debt facing uncertain futures, according to a financial expert.
At the same time, Stats SA's latest survey revealed the number of civil summonses issued for debt in the Western Cape decreased in the second quarter of 2020 compared with the second quarter of 2019.
“In June last year the number in the province was 7 317; this year it had fallen to 6 562. A similar pattern played out across the country with a national decrease of 59.7% for the second quarter of this year,” said the survey.
Statistician General Risenga Maluleke said: “The largest contributors to the decrease for civil summonses issued were: money lent (-15.6 percentage points); services (-15.3 percentage points); other debts which include municipal services, plumbers, builders, mechanics, panel beaters and electricians contributed -10.9 percentage points and promissory notes (-9.6 percentage points).”
“The Covid-19 pandemic and lockdown have had an extensive impact on economic activity, including work performed by the courts. This saw civil judgments for debt decrease by 62.7% in the second quarter of 2020 compared to the year before."
Izak Odendaal a strategist at Old Mutual, said the figures from Stats SA seemed to buck the general trend. “It is likely that some of the legal processes related to insolvency. Summonses etc were delayed by the lockdown. Banks also provided payment holidays to certain clients which could contribute to postponing such events.
“However, the underlying problem is not going to go away. South African households were under financial pressure prior to the pandemic, and have now taken a huge further blow,” said Odendaal.
“The pandemic has been an eye-opener for many South Africans, the outbreak of Covid-19 exposed some over indebtedness fault lines and lack of savings for a rainy day – simply put, we are a nation of spenders."