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Cape Town – Despite a negative economic growth in the first quarter of 2016, South African households are slightly better off than in the last quarter of 2015, according to the quarterly Momentum/Unisa Household Wealth Index.
South African households’ net wealth increased at a rate of 3.9% compared to the previous quarter. The increase was attributed to a decline in household debt and an increase in the real value of households’ assets.
The report estimated that South African households’ net wealth in the first quarter of 2016 amounted to just over R7trn – this is R67.8bn higher than the fourth quarter of 2015.
“Although the 3.9%-increase was marginal, it must be seen against a backdrop of real household net wealth that declined in 2015, compared to 2014,” the report said.
Higher consumer inflation, an increase in interest rates of 75 basis points and a decline in the purchasing of durable goods (products that are not bought frequently), have led to a slower uptake of credit. According to data released by the South African Reserve Bank, purchases of durable goods, including cars, declined at a rate of 14.4% in the first quarter of this year, compared to the fourth quarter of 2015.
“The consumer price inflation rate increased further and remained above the inflation target of 6% due to higher food prices and the weakening of the exchange rate,” the report said. “These two developments combined to reduce the affordability of goods that people would normally purchase by way of debt,” according to the report.
Although debt increased at a slower pace in the first quarter of this year, the value of household debt increased in current prices and amounted to R1.89trn, compared to R1.88trn in the previous quarter. This represents a 1.02% increase.
South African consumers use 25.6% of their gross salary to repay debt in the first quarter of 2016 – 23.1% higher than in the last quarter of 2015.
A closer analysis of household debt in South Africa showed that consumers who earn less than R10 000 per month hold 6.7% of debt in the country, but are responsible for 18% of all instalments on debt. On the other hand, consumers who earn more than R80 000 per month hold 20% of the total debt, but are responsible for 15% of the debt repayments.
“As such credit active consumers in the lower income groups and youth categories, who collectively comprise the majority of credit active consumers in South Africa, are most vulnerable to interest rate increases and also more likely to default on debt repayments.”
