More South Africans are falling into the debt trap yearly and 2012 has been one of the worst, a national debt counselling firm revealed on Tuesday. Debt Rescue Chief Executive Officer Neil Roets said last year the number of deeply indebted individuals who applied for relief under the National Credit Regulator’s debt review process was more than doubled. “We know from figures released by the Reserve Bank that the growth in total credit extension to the private sector in November last year increased to 9.6 percent compared to the figure of 8.3 percent in October 2012,” Roets said in Johannesburg.
The majority of South African working class reportedly spend up to a third of their wages repaying debts.
“Much of the increasing credit load has been piled on credit cards where individuals are paying very high rates of interest and it is clear that crunch time has come for many South Africans,” Roets said.
He said most of the consumers seeking help from Debt Rescue were in verge and danger of losing their homes, vehicles and other property.
“While debt counselling and the subsequent debt review process does help – mostly in assisting debtors to spread their outstanding debt over a longer period of time and protecting their assets against repossession, that in itself was not the solution,” he said, while calling on South Africans to be more responsible in their financial management.
Many are falling in the trap because of lack of self control and pressure to complete with their friends and neighbors, local social commentator Worship Munhangu said.
Investec economist Annabel Bishop said that the average household had 31.8 percent more unsecured debt than a year ago. This includes credit card debt.
She said the unsecured loans that households and business incurred was around 30 billion rand (about 3.5 billion U.S. dollars) which was more than 20 percent greater than a year ago.
Roets said a disturbing aspect of the rapid rise in indebtedness was the fact that it outstripped growth in the economy.
“Something has to give and we end up with the flotsam and jetsam of the debt crisis – people about to lose their homes and pretty much everything else they own,” he added. Endit