Johannesburg – Payment holidays and successive repo rate reductions provided South African consumers significant relief in 2020, but for those reliant on unsecured debt, the respite has proved short-lived.
This is one of the findings from a quarterly analysis of applications to the country’s largest debt counsellor.
Debt- Busters’ Q4 2020 Debt Index was published on Tuesday as part of its National Debt Awareness Month campaign aimed at informing consumers about managing debt.
The index shows that real incomes shrunk across all income bands, in some cases by up to 20% compared to 2016 levels.
To some extent, this reduction was temporarily balanced by payment holidays and interest rate cuts. While the combination of these two factors provided relief by reducing the repayments on homes and cars, interest rates for unsecured debt were still around 21%.
Since most South African consumers have unsecured debt, they were faced with a debt burden when payments recommenced.
Other findings from the 2020 fourth quarter debt index are:
• Income is declining in real terms and consumers are using unsecured debt to make up the shortfall.
• Compared to 2016, when DebtBusters began compiling the data, nominal income is 2% lower. When cumulative inflation of 18% is factored in, real income has shrunk by 20% over the four years.
• Across all income bands, unsecured debt is, on average, 32% higher than it was in 2016. For those earning R20 000 or more, unsecured debt levels were about 45% higher.
• People taking home over R20 000 a month spend 60% of their monthly net income to repay debt. At 130%, their total debt-to-income ratio is the highest it has been in years.
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