Financial insights 2021/ 2022
NDA CEO, Sebastien Alexanderson – shared his thoughts on the year past and the year ahead.
As the economy attempts to right itself again, many consumers are just trying to make it to the end of another tough financial year, while others are hoping for work and opportunities to recalibrate their finances. But despite the doom and gloom, we at National Debt Advisors (NDA) have seen a positive shift in consumer debt behaviour over the last two years.
The current economic environment impacts affordability for debt
With South Africa’s unemployment rate having climbed through the roof, and wages on a downward trend, affordability has not been in our favour for the last two years. The one upside of this is that it has contributed to an easing of debt levels as banks are not lending due to consumer affordability issues. While fewer new credit applications have been approved, banks have at least been providing payment holidays and extending terms to those in need of assistance.
Unfortunately, according to the national credit regulator (NCR), the overall level of credit impairment has been fairly stable but may worsen as the payment holidays and debt-relief measures introduced during the pandemic come to an end. In a warning statement ahead of the festive season, the NCR says that just over 10 million people in the country have impaired credit records. This is 38.41% of the 26 million credit active consumers, with approximately 61.59% or 16 million in good standing.
South Africans don’t seem to be revenge spending
Unlike our counter parts across the globe in Europe and North America who had a gigantic fiscal stimulus, a very high vaccination rate and a booming summer, we are yet to have any of these benefits in SA. This means that our consumers will undoubtedly take longer to return to healthy debt levels and recover financially. However, I have no doubt that our consumer market will start to get there over the coming year.
Some of the unhealthy spending trends that we have seen in the rest of the world, seem to have been significantly more subdued locally. The rest of the world was locked up and paid to stay home for a lot longer than we were here in South Africa. Most consumers in the rest of the world came out of strict lockdowns (lasting up to eight or nine months) with pockets full of cash and a desire to live. This has caused many countries to be faced with rising prices of goods and services through hyperinflation – a trend that we were spared, fortunately.
Overall, responsible consumer financial activity seems to be on the upswing. The last year was decidedly better than 2020, and 2022 is expected to be better than 2021, even with the new challenges brought on by the new COVID-19 variant. If we look at how quickly the world has rebounded, and the new lease on life that we have gained as a country, we can expect things to ramp up relatively quickly from an economic perspective.
Just because you can afford more; doesn’t mean you should spend more
With that in mind, I do have some advice for South Africans as we work our way towards economic recovery. Things are going to change quickly this summer season. We must remember that the road to financial recovery will take a little longer for SA and just because you may start earning more money and your affordability has changed; it doesn’t mean you should start to take out more credit just yet.
If you’ve lived without further credit for this long, maybe you’ll find that you can keep going. And if you are at the end of the line and need help putting a plan together, then seek out the advice of a registered and reputable debt counsellor.
With two of the toughest years of this century nearly behind us, 2022 is the year that you need to take the proverbial bull by the horns with your finances by becoming financially informed, empowered and making 2022 the start of your journey towards financial freedom.