South Africa's private debt crisis was costing the country an estimated R500-million a month directly and another R500-million a month in productivity losses, totalling R12-billion annually.

And the debt spiral is silently sinking financially illiterate working people into deeper poverty with more than 100 000 judgments instituted against defaulting debtors a month, a recent study has revealed.

Released by the department of economic affairs and tourism, the study by the University of KwaZulu-Natal's Industrial, Organisational and Labour Studies Unit focused on consumption trends and the effects of micro-lending practices on consumers.

While household debt had decreased from 61 percent of disposable household income in the mid-1990s to 54 percent in 2003, many more people were under financial duress than the decrease suggested, the study said.

Strides in consumer protection had been made with the Exemptions to the Usury Act of 1999 and the regulation of the industry with the formation of the Micro Finance Regulatory Council. However, the study found the council's scope was limited in view of the volume of the estimated R28-billion industry, rendering it unable to fulfil its constitutional mandate to educate borrowers.

While the study focused on workers and shop stewards in KwaZulu-Natal, the research revealed that 40 percent of households, nationally, were in financial difficulty, being unable to meet loan repayments to microlenders and other service providers.

In the past five years individual debt judgments had increased nationally by 43 percent. Durban accounted for 13 percent of debt judgments, the Cape Peninsula 19 percent and Johannesburg 15 percent.

Research showed that household incomes among workers in the R1 800-R5 000 bracket in KZN were on the decline because of huge debt repayments deducted directly off workers' wages.

"The saving potential among workers was found to be extremely low, as a result of their spiralling debt, lower take-home income and increase in basic expenditure," the study said.

Another survey, released by the department of trade and industry, has revealed that most consumers are not aware of their rights or of consumer protection organisations such as the Micro Finance Regulatory Council and the Financial Services board which can be approached with complaints.

The government has proposed the Consumer Credit Bill to help protect consumers from loan sharks and prevent them from falling into debt traps.