Antoinette Slabbert
2 minute read
7 Nov 2013
6:00 am

Households drowning in debt

Antoinette Slabbert

About 5 million South Africans are battling with over-indebtedness, the FinScope South Africa 2013 financial survey shows. That is almost 14% of the total number of South Africans older than 16.

Picture: Supplied.

The report, released by FinMark Trust in Sandton this week also shows a marked increase in the number of South African adults who utilise banking services and a bigger uptake on insurance, especially life and vehicle cover.

While fewer people are shown to be saving, those who do are taking up additional products. Fifty eight percent said they are not saving at all. The number of people with formal credit or loans have increased by 1.1 million a year ago, to 14.2 million.

Secured loans grew substantially, but were overshadowed by the doubling of the number of people with unsecured loans, the study shows.

Rob Powell, who presented the findings on behalf of TNS who conducted the survey, said the growth secured loans include a small increase in bonds, but is mostly driven by increased car sales.

Unsecured lending is aimed at building and improving lenders’ homes (36%) and for education (11%). It is however of concern that 19% of the lenders indicated that they borrow money to pay bills, monthly fees or unexpected personal expenses.

He said more than a third of the credit active population show signs of over-indebtedness like applying to reschedule debt, considering seeking help with their debt, considering cancelling policies to pay back debt, are in arrears with payments or have been garnisheed. The troubled consumers tend to borrow from multiple sources, including the informal sector. He said the troubled consumers include more women older than 30 who typically earn a salary and get income from their husband. “They have credit all over the place”.

Greater financial inclusion was driven by organic growth and the government’s social grant system that has been rolled out, paying money into bank accounts.

Powell said many grant recipients still only use their banking cards to withdraw their whole grant once a month and prefer cash. “They believe that if they leave money in the account, government will think they have money and stop paying the grant.”

He called for increased financial education in this regard.

All in all, it seems as if there is a lot of action in the space of adults earning between R3 000 and R8 000 per month, Powell said. That group has grown from 2,3 million a year ago, to 4,2 million in 2013, while the lower income groups have shrunk.

They use more credit, but also save more. Contributions to provident funds in this income bracket have grown from 22% a year ago to 27%.

A year ago 119 000 of them had education policies. This increased dramatically to 387 000 this year. The number of these individuals with overall savings has increased from 171 000 to 586 000.