The Biggest Debt Traps South Africans Fall Into


A long road lies ahead for South African consumers, despite the SA Reserve Bank reporting a better outlook and steady recovery in economic activity over the next 6 to 9 months.

The latest information on consumer credit behaviour – released by credit bureau Compuscan – revealed that more consumers had moved into higher delinquency categories from Q2 2016 to Q2 2017.

Most notably, increases in the number of consumers with accounts that were 3+ months in arrears were seen in many loan categories.

While the number of credit-active consumers listed on the bureau remained consistent at just over 19 million South Africans, Compuscan pointed to a significant increase of 10% year-on-year in the number of consumers with “3+ months in arrears” as the worst position on their credit records.

A 6% decrease in the total number of persons whose worst position was “one to two months in arrears” was also noted. This, it said, alludes to the potential that these consumers’ payment positions deteriorated further, regressing into the “3+ months in arrears” category.

The same trend was noted on account level, as the bureau reported a 5% year-on-year decrease in accounts that were one to two months in arrears and an 11% year-on-year increase in accounts that were 3+ months in arrears.

Type of debt

Considering the results on both consumer and account level, the study further revealed that consumers had struggled to stay on top of their vehicle and asset finance (VAF), fixed-term agreements, credit cards and store cards.

The data revealed a concerning 32% year-on-year increase in VAF loans that were 3+ months in arrears.

Furthermore, there had been a 30% year-on-year increase in fixed-term agreements that were 3+ months behind payment, as well as a 14% increase in adverse enforcements on accounts within the same loan category.

The bureau also found a 33% increase in store cards that had been subject to adverse enforcements, indicating that these accounts had been handed over, written off or that the facilities had been revoked.

The study also indicated a 6% year-on-year increase in credit cards that were 3+ months in arrears, along with a 94% year-on-year increase in the number of fixed-term unsecured loans (personal loans with a 6+ month term) that were 3+ months in arrears.

This increase was predominantly noted in Q4 2016, Compuscan said.

Young people, in particular, were among the age group that fared the worst in terms of adhering to their fixed-term agreements, such as retail furniture loans.

While the data revealed an overall 13% increase in fixed-term agreements that had been granted to 18 to 29-year olds, the majority (51%) of this age group were 3+ months behind payment or had been subject to at least one adverse enforcement.

Across all age groups, 31% of fixed-term agreements that were 3+ months in arrears belonged to consumers aged 18 to 29, the credit bureau said.