By: Nicola Mawson

South Africans went through some very turbulent times last year. According to the latest available statistics from the National Credit Regulator, as of September 2024, there were 28.2 million credit active consumers with a total of 96 million accounts between them. Of these, a full third had impaired credit records.

BrandMapp’s 12th iteration of its study of the taxpayer base noted that it was in the “family” years of between 30 and 50 that people were most likely to feel the burden of debt. Just more than a third of these consumers were debt-stressed, it said. “Debt seems to be the burden of the rising middle-class, not the wealthy.”

The Experian Consumer Default Index from last November found that credit applications had “reached their highest level on record, signalling robust consumer and business interest in credit products”. While lenders are responding to this demand, it is with caution, it stated.

“The increase in rejected applications highlights a more stringent assessment of creditworthiness, likely influenced by evolving risk management practices and macroeconomic conditions,” said Experian’s index.

Total consumer debt is now at some R2.3 trillion, with more than half of this being accounted for through bonds, according to the regulator.

Worryingly, the Prudential Authority, which regulates the banking sector, reported in February 2024 that 6% of all home loans were in arrears, compared with 4.5% during the COVID-19 pandemic.

Experian found that, while most types of debt were seeing improved payment profiles, there continued to be a deterioration in servicing home loans. Arrears levels are “at more than double that which was seen three years ago,” said its index.

Berry Everitt, CEO of the Chas Everitt International property group said, given that almost a quarter of all current property sales, as per an FNB survey, are motivated by the need to cut financial pressure, many households are still feeling the effects of the rapid post-COVID-19 rise in both inflation and interest rates.

Everitt said the latest cut in interest rates may not be enough to help homeowners who are battling to afford their home loan instalments, especially as the energy regulator has approved a tariff hike of almost 13% for this year.

“That increase will come on top of the other cost increases that consumers often face at the beginning of the year, such as higher school fees and insurance premiums, and could easily cancel out any relief brought by this rate decrease, as well as the previous two rate reductions,” said Everitt.

“In addition, fuel prices will rise again this month by between 82c and R1.05 a litre and we could also see an increase in taxes later in February when the Finance Minister presents the Budget,” Everitt said.

South Africans have been facing income growth that is slower than gains in the cost of living, with purchasing power having declined 44% since 2016, said Benay Sager, executive head of DebtBusters. Some examples Sager cited that contributed to this lack of spending power included electricity tariffs having increased 135% since 2016 while fuel went up 72% over the same period.

Sager noted that consumers experienced extreme pressure in 2024 up until the middle of the year in a period that was characterised by financial pressure, load shedding, high interest rates, and uncertainty around the pending elections. The scene shifted, however, in the second six months as interest rates and inflation came down and Eskom kept the lights on.

During a media briefing on Tuesday marking National Debt Awareness Month, Sager added that the second half of the year also saw consumers being able to access a portion of their retirement savings through the introduction of the so-called Two Pot system.

“As a result, I think going into 2025, the end of 2024 was much healthier and consumers’ confidence about what awaits them in the future is much more positive compared to a year before,” said Sager.

The DebtBusters Debt Index for the last quarter of 2024 showed that consumers were increasingly wanting to become financially stable, as evidenced by higher demand for debt management services. This trend, Sager said, is expected to grow this year.

Everitt said South Africans who are worried they may end up defaulting on a bond and act now will benefit from an increase in demand for residential property. Acting sooner rather than later also means protecting your credit score, he said.

Banks have assisted-sale programmes that are easy for borrowers to access, enabling those who have run into financial difficulties to stay on in their homes while these properties are being marketed and sold by top local estate agents. “Such sales are handled in exactly the same way as if the seller were not in financial distress,” said Everitt.

Brina Biggs, senior manager at Budget Insurance, said the future of debt management for South African consumers remains uncertain. “For a significant improvement in debt levels, substantial economic reforms and job creation are essential. If the economy can stabilise and grow, and if consumers can adopt more prudent financial habits, there may be a gradual improvement in debt management,” she said.

The DebtBusters Index found that consumers are still supplementing their income with short-term, unsecured, debt:

Consumers who applied for debt counselling at DebtBusters in the last quarter of 2024 needed 68% of their take-home pay to service their debt expense

82% of these consumers had a personal loan

A further 52% of consumers had a one-month (payday) loan.

PERSONAL FINANCE