More South Africans are being hauled before the courts for failing to honour the debts they incurred from borrowing money to keep up with the rising cost of living.
Stats SA recently found the number of civil summonses issued for debt increased by 0.3% by the end of April compared to the same month last year.
The data agency conducts monthly samples survey of civil cases and civil summonses for debt issued in South Africa.
“The largest positive contributors to the 0.3% increase in civil summonses issued were: ‘other’ debts (contributing 4.7 percentage points); and services (contributing 0.7 of a percentage point).
“Money lent was the largest negative contributor,” it said.
Don Consultancy Group chief economist, Chifi Mhango said banks and credit providers needed to consider options of debt restructuring.
“The household debt levels are continuing to show an upward trend on a monthly basis, as the inflationary pressures exacerbated in the South African economy. Of particular concern has been food and transportation prices which have impacted negatively the ability for consumer to service other debts, as the two are prioritised.
“The rising interest rate environment has brought more pain on the ability to afford debt repayment as income levels have not improved in relation to the increases in loan or debt repayment caused by interest rate hikes by the South African Reserve Bank.
“However, in some cases what is coming out is that even this is presenting challenges as unemployment is hitting most households. It is a tough call for both credit providers as well as consumers to navigate the tide. It is, therefore, important that there is relief on the interest rate movement.
We are hoping that the current inflation rate easing to 6.3% may be a sign of good times ahead,” said Mhango.
National coordinator of Fight Inequality Alliance South Africa, Wafaa Abdurahman, said: “Food inflation has gone up a lot and low to middle-income class just are not able to afford it anymore. Even for basic food stuffs such as bread and eggs...one pays about R20 for a loaf of bread nowadays and people are unable to afford that much.
It is shocking to see how expensive basic food items are that aren’t zero-rated. There are no subsidies or relief for citizens. There is a growing gap between the rich and the poor and there is no end in sight if there is no will by the government to (fix this).
“People are making more loans just to survive but it just puts us in a cycle of debt that will continue. There should be a decision to tax the rich more so that the government can subsidise lower-income groups. Tax the rich so that the poor can live,” said Abdurahman.
National Debt Advisors chief executive Charnel Collins recently reported that many breadwinners were struggling with increasing debt to secure their families’ future.
This, following the latest industry insights from the Eighty20 Credit Stress Report for 2023,which showed credit card debt saw a sudden 20% jump in the rate of new defaults in 2022 Q4, with total credit card balances sitting at about 12% higher than the previous year.
“These alarming figures depict a financial landscape where many South Africans find themselves treading water and struggling to keep their heads above the rising tide of debt.
"First and foremost, living within your means is essential. Avoid spending more than you earn and refrain from making major purchases, such as buying a house or car, before you can truly afford them," said Collins.
According to FNB, on Tuesday which released the findings of its inaugural FNB Retirement Insights Survey, 89% of those surveyed planned to continue working or work part-time due to a lack of retirement savings.
While 74% of respondents claimed they had a plan in place to help them prepare for retirement, many of those, particularly those in lower-income brackets, were not confident that their plan would deliver the results they wanted due to barriers such as age and current financial constraints such as the high cost of living.
Cape Times