South African consumers owe a total of R2.31 trillion. This is based on the reports (Consumer Credit Market Report (CCMR) and the Credit Bureau Monitor (CBM)) compiled by The National Credit Regulator.
The staggering amount of consumer debt in South Africa raises concerns about the financial well-being of its citizens. It begs the question: are South Africans addicted to debt or simply struggling to make ends meet? The answer may lie in a combination of factors.
One possible explanation for the high levels of debt is the allure of easy credit. With the availability of credit cards, personal loans, and store accounts, it has become increasingly convenient for individuals to spend beyond their means. The temptation to indulge in instant gratification often outweighs the long-term consequences of accumulating debt.
Another contributing factor could be the rising cost of living in South Africa. As inflation continues to outpace the increase of salaries, many individuals find themselves unable to cover their basic expenses with their current income. This forces them to rely on credit to bridge the gap between their earnings and the cost of living.
Increasingly turning to credit to afford basic necessities
Basic necessities includes, but is not limited to: bond/rent repayments, car/transport costs, groceries and electricity.
In the Credit Stress Report 2023 Q2 compiled by Eighty20, overdue balances on all loans have increased to R189bn. This was primarily driven by an increase of overdue home loans which amounted to an increase of R4.7bn QoQ (37%). This means that many South Africans can no longer keep up with high interest rates, causing them to default on their home loans.
On the back of consecutive interest rate hikes from the South African Reserve Bank, an increase in the price of food, an increase in the price of electricity, and with the latest increase of the price of fuel, it’s no wonder many South Africans have less disposable income available.
“Families are supplementing their incomes with loans, credit cards and overdrafts. It’s a monthly cycle that doesn’t end, sinking many households into debt” - Carte Blanche
A look at the credit active consumers in South Africa
- There are a total of 27.05 million credit active consumers in the country.
- 17.03 million of these credit active consumers are in good standing.
- In June 2023, the amount of impaired credit active accounts increased from 19.13 million to 19.29 million.
Salaries and a need for dealing with financial pressures using credit
When speaking during an interview with eNCA, South African Reward Association member, Kirk Kruger, had this to say regarding salary increases:
“Companies themselves are also under pressure. They need to balance the books. They need to make sure that any increases awarded are within budget and sustainable because an increase once its awarded is an annuity expense. It goes on into the future”
Kirk also explained how using credit is a short-term solution of dealing with the financial pressures South Africans are currently facing.
“Borrowing is a way of dealing with that financial pressure. A large amount of that does go to home loans, vehicle asset financing, but a very big part of that is going to unsecured debt. In other words, a personal loan, a credit card. And people are finding that that is catching up with them to the point that the majority of their salary is paying down that debt and that leaves them in a very difficult situation” - South African Reward Association member, Kirk Kruger.
Echoing these sentiments of unsecured debt is Founder & CEO of Meerkat, David O’Brien. When asked what trends he is seeing with Meerkat’s debt counselling clients, O’Brien said that what he had noticed is that people are living beyond their means using credit to finance their lifestyles.
He does, however, encourage South Africans caught in this debt cycle to consider debt counselling for relief.
“The kind of customer who has over-reached themselves and who is now struggling, we can actually help. We can cap their monthly [debt] repayments. We can actually reduce the interest rates that they are paying. Debt Counselling is a great process and we’ve helped thousands of people move forward with their lives.” - Founder & CEO of Meerkat, David O’Brien
Try not to live beyond your means
Be very careful about living beyond your means. Living beyond your means can lead to a never-ending credit cycle, where you find yourself constantly borrowing money to cover your expenses. This can be a stressful and unsustainable way to live. At Meerkat, we understand the challenges that come with managing debt, and we offer a more permanent solution through debt counselling.
By choosing debt counselling at Meerkat, you can break free from the cycle of debt and regain control of your finances. Our expert Debt Counsellors are here to help you every step of the way. Simply fill out the contact form by clicking the button below, and one of our experts will be in touch with you.
At Meerkat, we believe in empowering South Africans to make informed financial decisions. We encourage you to be very careful about living beyond your means. It may seem tempting to indulge in luxuries or keep up with the latest trends, but it's essential to prioritise your financial stability and future.
By choosing debt counselling at Meerkat, you can take the first step towards a more sustainable and secure financial future. Our team is dedicated to helping you overcome your debt and achieve financial freedom. Don't let debt control your life any longer. Fill out the contact form now and let us guide you towards a brighter financial future.