DebtBusters’ quarterly debt index shows that even before the lockdown South Africans were facing increased financial strain, taking on more debt to supplement incomes that had declined in real terms.
The report for the first quarter of 2020 found that consumers who signed up for debt counselling had nominal incomes that were 1% higher than in 2016, but because of cumulative inflation growth of 19%, real incomes declined by 18% - a massive blow to the average South African consumer.
Benay Sager, DebtBusters’ Chief Operating Officer, says it’s clear that consumers are borrowing more to make up for the shortfall in real income growth.
“There has been a substantial increase in average borrowing to supplement the decline in net income, with total debt up 33% on average compared to the same period in 2016. Total debt for top earners increased by 63% compared to Q1 2016 levels.
The number of consumers with home and vehicle finance seeking debt counselling has grown substantially. Those taking home R20 000 or more a month had a debt to annual income ratio of 142%, which is unsustainable.
The number of credit accounts consumers have when they apply for debt counselling indicates that consumers are getting over-indebted faster but are also seeking help sooner, says Sager.
“The silver lining is that debt counselling is incredibly effective. The number of clients who have successfully completed the process has increased by 65% per annum over the past four years. The process works, and is a fantastic tool to help consumers who are overwhelmed with debt”.