Debt counsellor DebtBusters has published its index for Q2 2020, showing that South Africans are taking on increasing amounts of debt to help get through the coronavirus lockdown.
The quarterly analysis tracks client trends quarter-on-quarter over the past four years.
The group said that its Q2 2020 clients required around 62% of their net income to service their debt every single month; with higher income levels requiring more of their income to service their debt.
On average, the group’s clients had a debt to income ratio of 113%, while those earning a net income of R20,000 or more had a debt to annual income ratio of 138%.
“Although it’s impossible to determine the full impact of the hard lockdown based on just one quarter, the four-year-trend shows that for most consumers debt levels are steadily increasing,” says Benay Sager, DebtBusters’ chief operating officer.
“This is because nominal incomes have been flat, so in real terms, people have less income than in 2016, as inflation over the same period has been around 20% cumulatively.
“As a result of lack of growth in their net incomes, consumers find themselves in a corner and have been borrowing heavily, especially using unsecured loans, to make up the shortfall.”
Types of debts
DebtBusters said that the largest increase can be seen in unsecured debt, which on average is 18% higher than it was four years ago.
For consumers earning more than R10,000 per month, unsecured debt is 31% higher – for those earning R20,000 or more per month, the unsecured debt levels are 42% higher than 2016 levels.
Consumers also typically owe money on home loans and vehicle financing.
Higher earners have more debt
The data shows that debt exposure worsened for clients in the R5,000-R10,000 and R10,000-R20,000 brackets.
However, South Africans in the highest income brackets still maintain the highest exposure to debt
“Consumers earning R20,000 or more a month had an unsustainable debt-to-income ratio of 138%. This is 12% more than during the same period in 2016,” Sager said.
“It is clear that in absence of meaningful increase in real income growth, SA consumers are supplementing their income with more debt on a large scale,” Debtbusters said.
The group noted that in comparison to 2016, those clients who applied for debt counselling in Q2 2020 had:
- Negative real income growth: Nominal incomes were 1% lower compared to 2016 levels; when cumulative inflation growth of 19% is factored in for the same period, real incomes shrank;
- Unsecured debt that was 18% higher than that in 2016 levels; for those earning R10 000 or more, the unsecured debt levels were 30-40% higher.