Sandiso Phaliso
SOUTH AFRICANS are R1.64 trillion in debt and finding it very hard to get out of the trap.
People aged between 31 and 45 collectively owe 53 percent of all outstanding debt. Most of the debt is for personal loans, less than a quarter have any money left after bills have been paid and 40 percent need debt counselling.
Credit cards and store cards are are also high on the list.
Neil Roets, of debt management firm DebtRescue, said yesterday the most disconcerting statistic was that the number of people seeking debt counselling was increasing by 40 percent year-on-year.
“It’s actually devastating. The situation is getting worse,” said Roets.
He said it was shocking how much of the borrowed money was spent on “luxuries and non-essentials”.
“This is clear evidence that a growing number of consumers are getting ever deeper into debt and need help from debt counsellors to get out from under the debt mountain most of them have accumulated over the past years,” Roets said.
“Most economists are predicting a further decline in the currency and a rise of 25 basis points at the next Reserve Bank Monetary Policy Committee. It is likely that we will be looking at an increase of 125 basis points by the end of the year,” Roets said.
The company’s research has found that South Africans are “woefully ignorant” of their rights in expired (prescribed) debt that does not have to be repaid, and the fact that credit providers are not allowed to collect on this debt.
“This is indicative of a lack of education and awareness of how important it is to understand at least the basics of financial management.
“We have found in our dealings with thousands of deeply indebted consumers over the years that a lack of understanding of simple things like credit agreements that were often very one-sided and downright unfair played a major role in consumers becoming overindebted in the first instance.”
Efficient Group chief economist Dawie Roodt echoed Roets’s comments, also blaming creditors lending money as irresponsible.
“The reality is that South Africans are in financial trouble and economic challenges are forcing them to borrow. The cost of living is one reason, but our education level when it comes to financial management is another factor. But most people who are in debt are living beyond their means,” said Roodt.
DebtBusters spokesperson Wendy Monkley said there were close to 24 million credit-active South Africans and 10 million of them are in arrears or struggling to pay their monthly debt repayments.
She said a growing number of consumers were turning to expensive payday-type loans out of desperation for cash as a means to get by each month.
“Unemployment is increasing and this has put a number of families under immense pressure when they are left with only one income earner.”
Solutions to overcoming over indebtedness included budgeting correctly and honestly, ensuring spare cash for emergencies, and approaching debt management companies for assistance with their monthly debt payments, she said.