Jobs crisis facing matric class will lead to increased debt

Owing to a tighter job market, Debt Rescue estimates that almost 500 000 youths will be joining the ranks of the unemployed this year.

This meant that only four out of every ten matriculants would be employed in the next year.

“In the last five years, we have seen a steady increase in the number of young people who have joined the ranks of the unemployed and this year is not going to be any different.

“If we take into account the number of workers who have given up looking for a job, the actual unemployment figure is probably closer to 40%,” CEO Neil Roets pointed out.

South Africa’s official unemployment rate was 25.5% in the third quarter of 2015.

Roets added that the unemployment figure was backstopped by the fact that the average age of individuals who became over-indebted, who then had to seek help by going under debt review, was also growing exponentially.

He said a typical scenario was that a matriculant might get a low-paying job with a fast food outlet or something similar. “Lured by the multitude of loans made available by financial institutions and retail outlets – many of whom do not do an adequate affordability check – they borrow to the point where they become over-indebted and unable to service their debt.”

Roets blamed the education system, as well as financial institutions for failing to ensure that young people were financially literate and fully understood the implications of entering into a credit agreement, whether it was to borrow money – usually at high interest rates – or buying furniture or luxury goods on extended period credit agreements.

“The rate at which people are getting themselves into financial trouble is more than doubling every year. In our own business, we have seen double-digit growth for the past five years as a result of consumers needing to go under debt review to protect themselves from avaricious debt collectors who want to seize their property to pay off their debt,” he stated.

Roets said the grim reality was that the majority of consumers in South Africa owed some 75% of their paycheques to creditors for loans, usually with very high interest rates attached.

“The reality is that many South Africans have become totally dependent of credit and without help, will probably never be able to pay back what they owe,” he added.

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