Financial services company Transaction Capital has published its results for the six months ended 31 March 2021, with the group warning that the Covid-19 pandemic and weaker economy has placed significant strain on middle-class South Africans.
Citing credit statistics, wage data and unemployment figures, the group said that overdue debt balances continue to increase, with a R33 billion increase seen in 2020 alone. It said that around 38% of loans are not in good standing.
This is combined with the highest unemployment rate in 12 years at 32.5%, deteriorating monthly income, and below-inflation increase. As such, 34% of households in South Africa are forecast to fall out of the middle-class, it said.
This is further emphasised by wage data, with fewer South Africans reporting income in the R22,000+ wage range, while significant more South Africans are seeing incomes of less than R8,000.
These concerns have been echoed by financial analysts, with the country’s middle-class expected to be particularly hard hit as the country begins its Covid-19 recovery.
The number of people in debt who are relying on their credit to stay alive has sky-rocketed, leaving the South African economy teetering on the edge of borrowed time, said Hans Overbeek, founder and chief executive of Cyber Finance.
While the impact is being felt by all sectors and groups, Overbeek said that middle-class families are increasingly falling behind.
“Many permanently employed workers have had to transition to contractual or informal employment, as businesses try and mitigate their own losses,” he said.
Overbeek said that more South Africans are also becoming indebted as they rely on their credit to support themselves and their families.
“Many people who were on track to pay off their debts prior to the pandemic have now been forced to take two steps back, as they struggle to stay afloat,” he said.
Data from consumer credit reporting company, Experian, found that the South Africans most affected by the economic downturn are those with the highest exposure to secured lending and other banking products.
These South Africans are increasingly more affected than those who experienced financial hardship before the Covid-19 pandemic, it said. This has been felt particularly hard in the higher income populations.