Last year I had the opportunity to visit South Africa and take a firsthand look at the consumer debt situation. There was no doubt even when I was there that there was going to be a huge explosion of consumer debt problems.
New regulations passed recently give more control to debt counselors to go before the court to have debt wiped out for consumers that was granted recklessly. It’s too early to tell how effective that new approach is going to be but with the tidal wave of consumers in trouble, I’m sure we will soon find out.
South Africans are trapped in the worst debt crisis yet, with whites owing more money than all the other race groups combined.
The Consumer Debt report, compiled by national debt counselling agency Credit Matters, revealed that whites — who make up 9.2% of the population with 4.4-million people — owe a massive R680-billion in household debt, compared with R310-billion for blacks , R82-billion for coloureds and R65-billion owed by Indians.
Household debt has quadrupled to more than R1.1-trillion in the past five years, according to the National Credit Regulator (NCR).
NCR project manager Mpho Thekiso said the study had been startling because the “perception” was that blacks were the deepest in debt.
“As a matter of fact, a majority of the white South African population is heavily indebted… and the situation is very serious.”
The shocking figures come as South Africans increasingly struggle to service their debt in a tough economic climate of high interest rates and inflation, rising food, fuel and utility costs and harder-to-get credit.
- More than six million people, half of South Africa’s entire labour force, can’t pay their debts;
- Each South African owes an average of R95000 in unsecured debt — which comprise credit cards, personal and student loans and utility bills;
- The most debt-ridden group is the 25-35 year-olds who earn between R8000 and R12000 a month;
- Gauteng is the most indebted province, with individuals owing R423-billion, followed by the Western Cape with R207-billion and KwaZulu- Natal with R177-billion; and
- In the first quarter of 2008, South Africans spent 82.3% of their disposable income on household debt, compared with 60.2% in 1998.
The number of South Africans in debt counselling — a last-ditch intervention to allow consumers to restructure debt to avoid blacklisting or repossession — has exploded over the last year from 2694 at the end of September last year to 26791 currently, according to the NCR.
As many as 2400 new applicants — of which about 60% are white — are seeking debt counselling every month, counsellors estimate.
But the 2.6 million-strong black middle class — known as Black Diamonds — are not immune: at least 10% have had items repossessed in the past year and a half.
Content in this article is also from The Times.