Statistics released earlier this month by the SA Human Rights Commission revealed that more than 50% of South Africa’s credit-active consumers (19 million) are over-indebted. This is being compounded by the country’s low level of savings.

Coupled with widespread retrenchments and salary cuts, consumers are financially stressed in 2021 it’s likely we will see this situation get worse before it gets better. Add to this the fact that credit providers are now aggressively pursuing collections after the end of payment holidays and it’s clear we are in for a very rough ride.

However, according to TransUnion’s third-quarter SA Industry Insights Report released in December 2020, the good news is that demand for new credit is falling and lenders have tightened their risk approach to new applications. The report revealed that enquiry volumes fell by double digits across all major lending categories. This was most noticeable for credit cards (down 49%) and non-bank personal loans (down 29%).

LESS DEMAND FOR CREDIT

“There is a silver lining to these dark days. Consumers are being cautious about taking on more debt, which is a positive thing. But they are still buried under mountains of debt incurred during the past year and well before the pandemic even started. 2019 was by no means a good year either,” says Neil Roets, CEO of Debt Rescue.

He says the financial consultancy firm has seen an increase in visitor numbers to its website, indicating a rise in consumers researching options.

“Since the start of lockdown in March 2020, there has been a steady uptick in casual visitors reviewing our information about the debt review process. We can attribute this to a consumer who is looking ahead and taking necessary steps towards addressing potential financial distress, clearly anticipating that tough times may lie ahead,” says Roets.

HELP IS NEEDED

Although vaccine roll-outs have started locally, the reality is that the pandemic will not be over soon. As the impact of Covid-19 on the already fragile economy becomes more evident, simple and accessible pathways to economic health, recovery and resilience need to be available to everyone.

“With eight out of 10 South Africans financially affected by the pandemic,” according to a Debt Rescue survey Roets urges consumers to be careful with their finances and seek help if they are unable to manage their current debt repayments. He advises those experiencing financial troubles to first reevaluate their income versus expenditure and see if they can work out a budget that can help them save before borrowing more.

HIGHER COSTS TO BEAR

Even with this approach, there are heavy price increases on the way – Eskom’s tariff increases will soon be phased in and consumers face a double whammy at the fuel pumps come April due to a rise in petrol and diesel costs as well as an increase in fuel tax announced in February’s budget speech. This has a knock-on effect on the price of goods as transport costs rise, while the general price of living goes up relatively in response.

“It’s not an easy time, that’s for sure. We urge consumers to cultivate a more frugal way of living as who knows how long this pandemic will last. Reports of an imminent third wave are increasing by the day and potentially by May or June we could be back in lockdown all over again,” says Roets.

TAKE CONTROL OF DEBT

Consumers who take the debt review route have access to affordable legal protection from credit providers. The process allows them to legally reduce their monthly debt repayments by extending terms and negotiating with creditors on their behalf.

“This has been a very successful solution for thousands of consumers who are plagued by over-indebtedness. The process makes provision that all living expenses are covered and that the consumer can live without taking on any more debt.”

“During such uncertain times consumers need to act wisely. This is not the time to be taking on new debt. Those who feel that they are in over their heads should consider all their options, including consulting with a registered debt reviewer who can help,” he concludes.

• Roets is the CEO of Debt Rescue, the largest debt counselling company in South Africa