SA consumers credit

SA Consumers Turn to Credit to Stay Afloat

Aug 24, 2016

The high cost of living has sent consumers running into the arms of credit providers. Middle-income groups in South Africa are struggling to afford even the essentials and are slowly approaching the breadline.

As the economy deteriorates, middle-class households are turning to credit just to stay afloat, according to TransUnion’s latest consumer credit index report. The index is a gauge of consumer credit health.

It factors in household cash flow conditions, credit behaviour and debt servicing costs.

“The overall macroeconomic conditions remain rather fragile, so now is no time for complacency,” said TransUnion Africa’s regional president, Geoff Miller.


Turning to Revolving Credit

Recently, revolving credit increased to 2% from 1.2% in the previous quarter. This includes store and credit cards.

“Middle- and lower-income households were most severely affected by deteriorating household credit health,” explained ETM Analytics Economist, Russell Lamberti.

Lamberti ascribed the development to these households having more access to unsecured lending.

“During challenging economic times these households often utilise revolving credit via store cards and credit cards to augment their disposable income.

“The fact that these households need to access credit to maintain living standards could be an indication that South Africans continue to live beyond their means.”

He concluded that it also reflects South Africa’s struggle to “create wealth in a depressed economic environment.”


Food Price Inflation

From June to July, the cost of a basic food basket rose by 1.4% from R1887.83 to R1914.29, according to the Pietermaritzburg Agency for Community Social Action barometer, which monitors food prices from month to month.

In our country’s current economic environment, the major factor threatening household cash flow is “particularly sticky inflation for non-discretionary goods such as food,” said Lamberti.

“Households are being forced to fork out more for essential goods, which leaves little spending capacity for purchases of durable and nonessential goods.

“Real wage growth is simply not keeping up with non-discretionary goods inflation,” concluded Lamberti.

South African consumers are being forced to use store and credit cards due to the ever increasing cost of living. Salary increases can’t compete with inflation – food and household goods are highly overpriced. Even after cutting back to the bare basics, credit cards and store cards are still needed. South Africa is now an incredibly expensive country to live in.

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