Johannesburg – An increasing number of financially-stressed
South Africans are turning to debt review, says Neil Roets, CEO of Debt Rescue.
His comments come despite inflation slowing to 6.3
percent in February – from the 6.8 percent seen a few months ago, and the South
African Reserve Bank effectively holding the prime lending rate stable at 10.5 percent
over the past few months.
Roets says the company has seen a 20 percent growth rate
over the past 12 months in clients applying for debt review.
His remarks follow those of Capitec Bank, which on
Tuesday noted that applications for debt review grew 19 percent in the year to
February, while 15 percent more clients submitted retrenchment letters to the
bank.
Capitec notes, in its statement to shareholders, that the
“financial stress and economic difficulties experienced by clients during the
year were evident.”
The bank, now SA’s third largest, also said there was an increase
in clients who received their salaries late or experienced reduced or no
inflows. It also experienced clients who wanted to reschedule their loans.
Roets says, based on the substantial increase in those
seeking debt review, it is clearly evident that times are tough – and he
expected even rougher seas ahead for consumers following the debacle with
finance minister Pravin Gordhan.
“This time round it is not just the poorest of the poor
but the middle class and the well-heeled who are feeling the pain.
“It is also not limited to a specific age group although
the 18-35 old age group is showing a slightly higher rate of distress.”
Read also: Gordhan's sacking appears imminent
Roets adds there has been a higher rate of repossessions
of both fixed property and other goods such as motor vehicles this past year
than in previous years.
More than 250 families were losing their homes on a
weekly basis to sales in execution because they fell into arears with their
bond repayments.
Johan Muller, MD of Problem Bond South Africa, said the
problem of homes being sold in execution was growing. Specialising in assisting
distressed homeowners who are on the verge of losing their properties, he said
the situation was dire and getting worse.
“If the unstable political situation in South Africa
persists – or is aggravated by the present spat between the finance minister
and the president – we expect many more home owners to default on bond
repayments with a strong possibility of ultimately having their properties sold
out from under them.”
Roets said it was clear that there was no sign of relief
for the immediate future.
“Things are going to get a lot tougher for consumers and
now is the time to tighten our belts and knuckle down for the financial storm
that is going to hit us.
There were a number of major problems looming anyone of
which could further derail the economy.
“If things go sour any further between the finance
minister and President Jacob Zuma this could lead to downgrades by the three
ratings agencies. It could also lead to a massive outflow of foreign investment
capital.
The continuous hammering on the subject of expropriation
of land without compensation was making this country look more and more like a
socialist state that would see investors fleeing in droves leading to massive
job losses and further distress for consumers.”
It was hugely important to budget for unexpected expenses
and to avoid using high interest-bearing credit and store cards.
Roets said total consumer debt was now standing at almost
R1.6 trillion (according to the latest figures released by the South African Reserve
Bank).
“A recent World Bank index has also shown that South
Africa is one of the most indebted countries in the world.”
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