We’re the ‘biggest borrowers’

Image courtesy Freerangestock.com (Chance Agrella)

Image courtesy Freerangestock.com (Chance Agrella)

South African borrowers are either splurging or struggling to survive, says a new World Bank survey that ranks South Africans as the world’s biggest borrowers.

According to the report, the Global Findex database, 86% of South Africans borrowed money between 2013 and 2014 as living costs continued escalating. Of that, 71.2% borrowed money from family and friends.

High living

This is despite 70% of respondents having accounts at a financial institution, where only 12% seek financial assistance. Debt management company Debt Busters says this can simply be attributed to the high cost of living in South Africa. The company’s Damon Sivitilli says the cost of living in South Africa often exceeds most people’s income.

Sivitilli highlighted the increasing cost of fuel, electricity and food as the main contributors to consumers’ pain.

And there appears to be little relief on the horizon – the fall in the oil price was accompanied by rising taxes on petrol and Eskom’s spending plans imply increasing tariffs until at least 2018. And all the while the rand keeps falling, pushing up the costs of imported goods.

According to the World Bank study, 9.2% of South Africans borrow money to buy houses, while 7.5% do so to start businesses or to fund education and 18% do to cover health care costs. The study also indicates at least 30% of adults in South Africa say they will be unable to raise funds in a crisis.

Sivitilli says most people spend to maintain a certain basic lifestyle, to live luxuriously or simply to survive. He says anyone in those categories may find themselves in debt and unable to make ends meet.

Money coach Gary Kale of the Money School agrees, saying the reality is consumers either have to cut down on their spending or borrow. He says this often lands many in debt – a further indication that half SA’s credit active consumers are over-indebted.

Kale says many consumers spend about 76% of their income repaying debt. He cites a statement by the International Monetary Fund earlier this year indicating high household-indebtedness could pose a threat to an already sluggish economy.

Knowledge deficit

Kale also says most South Africans who are in debt are ill-informed about how to have a healthy relationship with money. He says in cases where one’s income is insufficient to pay all incurred debt, some consumers acquire more debt in the form of loans.




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