Adv Kate Thambiran (Director) @ Lucid Living
A survey of consumer debt has come to the shock conclusion that South Africans are trapped in the worst debt crisis yet, with more than 6000 new debt counselling applications a month.
Debt counselling agencies are swamped with 276,601 applications for debt reviews – a last-ditch intervention to allow consumers to restructure debt to avoid blacklisting or repossession.
The Consumer Debt report, compiled by Credit Matters, said more than 8.9million people are trapped in a debt nightmare.
The report, is based on interviews with financial industry experts, debt counsellors, media reports and information from Statistics SA and the National Credit Regulator (NCR).
Seven fuel hikes since January and soaring food, electricity and water prices are taking their toll on consumers – from the poorest to middle-class property owners and even businesses. Life has become a lot less affordable. It’s become extremely difficult for many South Africans to get themselves out of debt.
The survey also found:
* South Africans pay about 75% of their salaries to service debt.
* Economists think 400,000 to 500,000 jobs could be lost in what remains of this year.
* More than 8.9million people have bad credit records – accounts three or more months in arrears – and an average of 174,000 are added to the list each quarter;
* More than 16.4million accounts, from electricity to retail store accounts, are impaired and more than 6million are more than a month or two in arrears;
* Household debt, which was R952-billion in 2008, tops R1.2-trillion. This is money owed to financial institutions for mortgages (more than half the total), overdrafts, leases, instalment sales and credit cards.
Absa executive Kim Royds said: “Recently we have begun seeing a steady increase in the number of foreclosures, which shows that even though the economy is beginning to show signs of recovery customers are still struggling to recover.”
Royds said foreclosures were up 14% on last year. The banking sector had also noted an increase in the number of people applying for debt counselling and insolvencies.