How much financial trouble are South Africans in?

How much financial trouble are South Africans in

How much financial trouble are South Africans in?

One could argue that South African consumers are amongst some of the most vulnerable in the world. With the majority of our population not earning enough to cover basics, many are forced to rely on multiple creditors to make ends meet at the end of the month. For most consumers, this pattern of creating and paying off debt while creating more kept them in a predictable loop of debt management until the coronavirus pandemic and the record 32.6% unemployment rate drastically changed that.                                  

According to reports from VeriCred Credit Bureau (VCCB), the total number of consumers under debt review in the second quarter of 2021 reached 717 496 showing a growth of 2.79%. With the ongoing increase of consumers requiring assistance managing their finances, South Africa’s consumer situation is deteriorating due to the average debt-to-income ratio reaching higher levels than ever before. A notable effect of the increase in Debt Review applicants shows that more consumers are taking charge of their finances instead of pushing themselves further into debt.

The VCCB quarterly credit reports revealed that the largest growth in total debt and debt of arrears was Retail accounts, while Debt Collectors and Microlenders were the industries with the highest growth in the amount that was in arrears. The quarterly credit reports also show that consumers in arrears showed a small decline in volume, while the amount in arrears of each consumer on a quarterly basis increased, meaning that the majority had their arrears amount increase, putting them even further in debt. However, there is good news. VCCB revealed that the average arrears debt only increased from R14 279 per consumer in Q3 in 2020 to R15 893 in Q2 in 2021, implying that the debt situation is slowly – but surely – improving as the economy begins to stabilize.

Many South Africans have suffered a job loss or only received a percentage of their usual salary, meaning that consumers – a majority of whom already earn less than needed – were put under more financial strain. However, it is important to note that the rise in debt is not solely due to the effect of Covid-19. With debt making up 80% of the country’s GDP, the International Monetary Fund advised that borrowing was already on an unsustainable path before the pandemic struck.

Although the debt growth is beginning to slow down, a majority of South Africans still require assistance as they get back on their feet. If you are struggling to manage your financial responsibilities, our expert team of Debt Counsellors can assist. At Debtco Group, our Debt Counsellors are registered with the National Credit Regulator (NCR) and can assist with restructuring your monthly repayments by providing budget advice and support and mediation with your credit providers.

If you would like more information on how we can assist you, please contact us for a free initial assessment.

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