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Our heritage as poor savers and big spenders has lead us to a debt pandemic

by | Sep 9, 2021 | Personal Finance

During Heritage Month wherein we acknowledge and celebrate our cultural diversities – it would be amiss to not take a look at our past, and its impact on how we navigate our finances.

As a result of our historical inequalities, a huge disparity exists between rich and poor. With the majority of our people still living in some degree of poverty, it should come as no surprise that South Africans are considered among the world’s worst savers. The struggling economy coupled with the Covid-19 pandemic has only compounded this financial strain, leading to a growing ‘debt pandemic’ as South Africans are increasingly turning to credit to survive.

According to a survey by consumer credit reporting agency, Transunion – 50 % of surveyed households said they have not recovered from the effects of the pandemic. Only 3% of surveyed households said their finances have fully recovered.

Debt to disposable income for SA households is at a staggering 75%, notes the SA Reserve Bank, with the average SA family spending three quarters of their take-home pay on servicing loans. This percentage is likely to be even higher, considering that it only takes into account formal debt (loans from registered financial service providers) and not dealings with notorious “mashonisa’s” – which is a huge part of the historical and current South African debt landscape.

Sebastien Alexanderson, CEO of National Debt Advisors (NDA) says, “As an already indebted nation, well-known for our conspicuous consumption and poor saving habits, we are facing another ‘pandemic’ in the form of debt. People have resorted to buying necessities on their credit cards or taking on more debt in an effort to try and service their existing debt. This cycle makes it very difficult for South Africans to save and leave a legacy for future generations.” says Alexanderson.

If you find yourself overwhelmed by your debt burden, Alexanderson says that it’s important to know that you are not alone. “Do not suffer in silence. There are professionals who can help.” he says.

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