South Africa’s mounting debt trap

 ·5 Apr 2024

More and more South Africans are feeling the pressures of credit, with escalating fiscal pressure making it difficult for many to keep on top of payments.

This is seen by debt for South Africans currently sitting in R2.31 trillion, with R142.26 billion of new credit added July to September 2023, according to the National Credit Regulator.

A recent study by The Outlier titled “Debt Trap” sought to visualise this, tracking the changing nature of debt in the country and its impact on South Africans.

The study showed that 10 million out of the 27 million South Africans with credit are three months or more behind in debt repayments or facing legal action and adverse listings, according to the most recently available data from the Credit Bureau Monitor.

“Part of the increase is certainly that many more people in South Africa have access to credit today than they did 16 years ago,” said The Outlier.

Graphic: The Outlier

Looking at the R2.31 trillion of debt, the Consumer Credit Market Report showed that this is comprised of:

  • Mortgages – R1.21 trillion (52.23%);
  • “Secured credit agreements” – R501.90 billion (21.71%);
  • Credit facilities – R317.62 billion (13.74%);
  • Unsecured credit – R221.57 billion (9.58%);
  • Developmental credit – R61.12 billion (2.64%);
  • and Short-term credit – R2.20 billion (0.10%).
Graphic: The Outlier

“Despite people struggling to pay their debts, the appetite for debt has not decreased,” said the Outlier.

From July to September of 2023, there were 15.5 million credit applications, according to the National Credit Regulator. Of these, 68.90% were rejected, marking a notable shift from 2007, when the approval rate for loans was approximately 60%.

Most recent data shows that in quarter 3 of 2023, a significant portion of credit granted went to consumers in the Gauteng province at R59.67 billion (41.94%). This is followed by the Western Cape and KwaZulu-Natal, which accounted for R26.07 billion (18.32%) and R19.12 billion (13.44%) respectively. The remaining provinces constituted R37.41 billion (26.29%)

Graphic: The Outlier

In terms of the approved credit, this was made up of:

  • Banks – R114.37 billion (80.40%);
  • Retailers – R5.79 billion (4.07%);
  • Non- bank financiers – R10.62 billion (7.47%);
  • and “Other credit providers” – R11.48 billion (8.07%).
Credit granted – percentage distribution. Graphic: National Credit Regulator

In 2023, there was a steady rise in the number of first-time homeowners defaulting on their mortgages, with figures nearing the peak levels observed during the Covid years.

Graphic: The Outlier

Although it is easier said than done, Poppy Kweyama, manager at the National Credit Regulator, Said, ” To avoid an impaired credit record, consumers are advised to borrow wisely and responsibly and restrict credit to only what is necessary.”

Kweyama urges consumers needing financial help to keep the idea of being “credit smart” at the top of their minds at all times.

She recommends borrowing solely from registered providers, only taking out what is necessary and when truly needed, planning repayment in advance, and ensuring the affordability of repayments.

The regulator “also encourages consumers to understand their credit agreements and the T’s and C’s before signing.”

For a full list of registered and cancelled / lapsed credit providers can be found on the National Credit Regulator’s website.

Read: South Africa only has the second-highest credit rating on the continent – and it just got matched

Show comments
Subscribe to our daily newsletter