The burden of debt

Mandi Smallhorne
2013-05-31 11:47
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Debt Issue
Cape Town - What are the biggest debt burdens for South Africans? A revealing survey done by Fin24 during May 2013 gives a bird’s-eye view of the South African debt picture.

Nearly 30 000 people responded to the online survey, with the majority of them falling into income categories ranging from R60 000 per year to R240 000 a year, so it’s likely that these results could be extrapolated across the middle classes.

And one in three of them – 32.76% - "never" have money left over at the end of the month, while only 14.96% of respondents have money left every month.

More than half of the rest said they only have money left over “occasionally” or “Only when I get a windfall like a bonus”.

A shocking 41.50% spend 80% of their monthly income on repaying debt (followed closely by the one in four who devote half their income to this).

And what are they repaying? Some good debt, a lot of bad. Just over half have a home loan to pay off, which is a good investment. And 40.46% are paying for a car, which is probably essential transport to get them to and from work.

But 63.63% have credit card debt to pay off, while 61.23% are paying off personal loans at the bank.

We know these are seldom used for buying assets that will gain in value over the years; rather, personal loans are often used to pay for items of fleeting value, such as holidays, or to cover urgent demands for cash, such as paying off outstanding debt.

Nearly 60% of us have retail store cards and cellphone contracts to pay. Shockingly, just over 20% (one in five) is paying off a microlender, while nearly 30% is servicing an overdraft.

A further jolt arrives when you realise that of those who are using the services of a microlender, just over 22% go into debt every month - to buy food. A similar number have to use microlenders to cover their transport costs every month.

Interestingly, the survey reveals that the one thing most of us just would not do without is the cellphone.

When asked which accounts people manage well, paying them on time and in full every month, just over 56% said this was how they managed their cellphone account, which just pipped the home loan (at about 55%).

But it’s no wonder those microlenders charge high rates – they get their money on time and in full from only 17.44% of us!

The survey paints a picture of a population that is experiencing quite a bit of financial stress, with many not coping well at all.

The survey stats are underlined by official numbers from the National Credit Regulator. The body puts the number of credit active South Africans at over 19 million, with nearly 10 million of those having impaired credit records.

This means that each one of that 10 million either has a judgment against them, or is more than three months in arrears on their accounts.

The aim of the survey was to gain knowledge on the debt situation of South Africans, so that Fin24 can provide consumers with relevant tools and articles to effectively manage their debt.

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