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Drowning in debt, seeking multiple jobs – survey shows South Africans’ financial battle

  • South African employees are taking second jobs and resorting to expensive short-term loans just to make it through the month, a new survey reveals.
  • Most employees surveyed were unable to make their income last even until month-end.
  • Emergency expenses, such as car repairs and unforeseen medical bills, accounted for 31% of respondents’ additional funding needs.

South African employees are taking second jobs and using expensive short-term loans just to make it through the month, a new survey reveals.

The research was released on Monday by PayCurve, a financial technology platform which allows employees early access to a portion of their earned income ahead of payday.

It points to “a nation struggling to stay afloat”, with most employees surveyed unable to make their income last even until month-end, according to Tamir Sacks, CEO of PayCurve.

Sacks said a “representative sample” of 500 South Africans aged from 16 to 65 and earning a salary each month, was surveyed, and the results reflected how severely financially stretched working South Africans are.

Emergency bills

The survey found that emergency expenses, such as car repairs and unforeseen medical bills, accounted for 31% of respondents’ additional funding needs, while 8% of respondents said the extra funds would be used for educational expenses. Most of the respondents who needed financial help in meeting these costs were aged between 36 and 45.

Almost half of those surveyed said they were being forced to take a second job – if they were lucky enough to find one – to make it through to the end of the month. Close to 80% said they must take out expensive short-term loans to meet their obligations.

“When faced with a financial shock, as we have seen in recent months with the arrival of the Covid-19 pandemic and its concomitant impact on jobs and household income, people are really struggling to keep up with their daily expenses,” commented Sacks.

“We are therefore not surprised to see so many respondents stating that they need additional finance to survive, even though we know that credit is often expensive and that reliance on short-term credit may exacerbate the problem.”

Short-term debt

What is worrying for Sacks is that, according to the findings of the survey, 70% of respondents said they currently pay a percentage of their salary towards short-term debt repayments. Furthermore, 11% of respondents spend more than half their monthly income on short-term debt repayments, while a further 43% said they pay more than 20% of their salary towards short-term debt.

“As debt repayments mount through the increased reliance on short-term credit, the sum of funds available for other expenses dwindles, putting consumers at risk of finding themselves in a debt spiral that can be a costly and lengthy process to resolve,” said Sacks.

Debt

Neil Roets, CEO of debt counselling company Debt Rescue, said on Monday that an “alarming number” of consumers cannot repay their debt. The extent of their indebtedness has also grown substantially compared with the same period last year.

“The most worrisome of all is the fact that we are now seeing the top earners on the ladder such as doctors, lawyers and corporate executives knocking on our door to place then under debt review,” said Roets.

A recent survey by Debt Rescue among a sample of 1 000 South African consumers, found that 85% of South African respondents needed help either financially, emotionally or both because of the Covid-19 pandemic. A further 55% required financial help, but had no access to credit. An additional 96% were stressed about their health, finances or both.

Roets said one of the findings that made him sit up and take notice of the evolving crisis among consumers in the country, was the fact that only 26% of the respondents reported that they had successfully applied for a payment holiday while 51% said they had no savings to fall back on.

“We have seen a huge increase in the number of enquiries from people who wanted to go under debt review,” says Roets.

“The fact that only 11% of those polled believed they could pay normally after their payment holiday ended shows emphatically that there is a major problem in the offing.”

Roets said it was imperative for consumers to cut spending wherever possible and to repay high interest-bearing debts as quickly as possible.

Full article: https://bit.ly/3b1AvbO

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