Many South African households hit hard, struggle to get by

Johannesburg – More South Africans have seen their disposal incomes slashed due to the debt burden, with a study by Transactional Capital indicating that 34% of households in the country are likely to fall out of the middle class.

Sebastien Alexanderson, the CEO of National Debt Advisors, says that the findings from the Transaction Capital study are concerning.

“According to Statistics South Africa, about half of South African families are considered poor, while about 30% are considered working to middle class,” says Alexanderson.

“Furthermore, Transaction Capital’s research also stated that 34% of households in South Africa are forecast to fall out of the middle class. This is further emphasised by wage data, which show fewer South Africans have an income of over R22 000 per month – while significantly more have less than R8 000 per month.

“If you were earning R6 000 a month and lockdown hit, but you were still earning and living off the same amount, then nothing much changed for you. On the other hand, if you were earning R40 000 per month and your monthly living expenses and debt repayments totalled R35 000 per month, but your income was slashed to R25 000 per month, then you were, and remain, in trouble.”

Data from the National Debt Counsellors’ Association (NDCA) also makes for troubling reading. The NDCA has found that enquiries about debt counselling have grown significantly this year, with some of its members recording increases of over 30%.

NDCA chairperson Benay Sager says the increasing numbers are not unexpected given the effect of successive lockdowns on an economy that was already struggling before the pandemic.

“Loss of income, salary reductions, bonuses and incentives that have been reduced or not paid at all, combined with payment holidays coming to an end and already high levels of household debt, meant people who were previously just about getting by no longer could,” says Sager.

He adds that while debt counselling has many advantages and is well run and highly regulated, consumers need to understand that it is not an instant solution.

“Debt counselling is a long-term commitment, not an easy fix. Just as it takes a while to accumulate debt, it also takes time to reduce it.”

Sager says there are significant benefits to debt counselling.

These include:

•Monthly repayment s are reduced by renegotiating the period over which the debt has to be repaid and securing lower interest rates

• Consumers make only one payment for all their debt obligations.

• Consumers’ assets, such as homes and vehicles, are not at risk

• Rather than having to deal with numerous creditors, they deal only with one person, the debt counsellor, who renegotiates all the debt

• The debt is restructured to ensure that the monthly payments are affordable and there is some money left to cover essential expenses

• In terms of the National Credit Act, the process is legally protected Experian data found that people most affected by the economic downturn are those with the highest exposure to secured lending and other banking products.

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