Debt Panic as South African Economy Bombs

One of the big three credit bureaus, Compuscan has published new data, which reveals just how South Africa’s deteriorating economy has affected credit users.

Several economic factors drove our country to a near downgrade to junk status by international credit rating agencies. These same influences have not only contributed to the decline of the rand, but also job losses, and fuel and food price hikes, said Compuscan.

‘…consumers, even those of higher income brackets, have been affected by increases in the cost of living.’

Vehicle Asset Finance

Moreover, these factors have hurt the already ailing credit market. Compuscan paid particular attention to vehicle asset finance (VAF) accounts. Trends indicate that creditors have been hesitant to extend medium to high value VAF loans.

“This was very likely due to concerns about consumers not being able to afford this debt.” Compuscan said.

Changes compared to the last quarter:

• 19% increase in VAF accounts 3+ months in arrears.

• 29% decrease in VAF accounts between R400,001 and R999,999

• 20% decrease in R1,000,000+ VAF loans

• 13% decrease in VAF loans between R250,001 and R400,000.

• 156% increase in R50,000 or lower VAF loans granted

• 16% increase in VAF loans between R51,000 to R100,000

• 10% increase in VAF loans between R101,000 and R250,000.

“These changes likewise point to the fact that consumers, even those of higher income brackets, have been affected by increases in the cost of living.”

“This reiterates the possibility that those who might ordinarily have qualified for loans over R250,000 were not able to do so and thus had to settle for a loan of a lower value,” said Compuscan.

Of course, the poor are more severely affected by higher living costs, which, in turn impacts the bureau.

‘There was a 2% increase to 27.5 million consumers with judgments, notices and accounts listed at the bureau.’

Impact of Higher Living Costs at the end of the first quarter:

• 32% decrease in current short term loans

• 11% increase in short term loans 3+ months in arrears.

Current Accounts

Loan accessibility has been influenced by other factors too, stressed Compuscan senior data analyst Jacobus Eksteen. For one, credit providers rolled out stricter lending criteria after new regulations came into force.

From the fourth quarter of 2015 to the first quarter of 2016, there was a 2% increase to 27.5 million consumers with judgments, notices and accounts listed at the bureau.

‘There are around 146,000 over-indebted consumers undergoing debt counselling’

Recorded at the end of the first quarter of 2015:

• 7 million current accounts

• Only 48.6 million accounts were paid up to date.

• 10% decrease in current accounts.

• +/-146,000 over-indebted consumers undergoing debt counselling.

• Around 2.8 million consumers were 3+ months in arrears.