South Africa’s middle class is facing a massive debt problem, and the lack of end-of-year bonuses and wage stagnation means that many people are borrowing to pay for necessities such as food and transport.
Speaking to the Sunday Times,Paul Slot from the Debt Counselling Association said that 10 million people in South Africa have bad debt — meaning they have missed three or more monthly repayments. He said that these people have an average of eight loans each.
On average those in bad debt spend 63% of their after-tax income on repayments, he said.
The report stated that the middle class is particularly hard hit.
“While there are more people in the US and UK with debt, those countries’ unemployment rates are lower than South Africa’s. We have an incredibly high number of people who are unemployed who are in debt.”
Slot said a survey the association conducted among people with bad debt found they are borrowing for daily necessities such as food and transport, and are also cutting back on their medical aid and insurance policies.
“Our company conducts 250 reckless lending investigations a month, with 50 reported to the courts a month. It is incredibly worrying as it shows people are desperate for money and are willing to enter reckless loan agreements,” he said.
This was confirmed by the National Credit Regulator (NCR) statistics and research department supervisor, Bongani Gwexe, who said that 84% of those who earn R15,000 a month or more have some form of debt. The average middle-income salary is R20,000.