This week saw the launch of an index that estimates to what extent South Africans who have defaulted on their debt repayments are making progress towards becoming financially healthy again.

Transaction Capital Risk Services released its Consumer Credit Rehabilitation Index (CCRI) for the second quarter of 2017, and compared consumers’ circumstances at the end of July with those in July last year.

Transaction Capital Risk Services is a technology-led, data-driven provider of credit management solutions in South Africa and Australia.

The CCRI is based on a sample from the company’s own database of over five million consumers in credit default. It uses an algorithm to estimate consumers’ ability to repay their debt and take positive steps towards financial rehabilitation.

The index shows that the rehabilitation prospects of South African consumers in default deteriorated by 1.1% in the second quarter of this year compared with the second quarter of 2016. 

The Free State showed the biggest decrease at –16%. Gauteng remained broadly flat at –0.2%. The Western Cape was the only province showing an improvement, of 4.8%.


David Hurwitz, the chief executive of Transaction Capital, says: “Credit rehabilitation is often overlooked as a crucial element towards growing an inclusive economy, as it allows consumers to re-enter the mainstream consumer market through access to conventional finance. Simultaneously, it allows lenders to maintain a cleaner balance sheet to extend credit.

“The deterioration across the CCRI categories can be linked to several factors, including elevated levels of unemployment (currently 27.7%), escalating costs of household essentials over the medium term and high levels of household debt to disposable income (73.2% in the first quarter of 2017). These continue to reduce the amount of money available to repay debt. 

“While [the ratio of] household debt to disposable income has reduced gradually, this is mainly due to debt growing at a slower pace than income, rather than an absolute decline in household debt.

“The recent 25 basis-point rate cut in July may improve households’ debt-servicing burden, but only moderately. However, we believe that a gradual deleveraging of the consumer will prevail,” Hurwitz says.