The middle class cash bomb debt-onates

2015-03-01 20:00

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We’re just three months into 2015 and the number of South Africans applying for debt relief is already soaring. Sipho Masondo examines what’s keeping the middle class under debt’s dirty thumb

The number of South Africans applying for debt review has shot up nearly 30% a month since December 2014.

Paul Slot, the president of the Debt Counselling Association of SA, says the number of people applying for debt review has increased from about 11?000 a month last year to about 14?000 a month in 2015.

Slot is certain it’s only going to get worse:

“We are likely to see an increase (in applicants) this year.

“Normally, consumers would apply for one debt to settle another. But access to more credit has become difficult. Credit providers are refusing to give loans to distressed consumers, many of whom are fully stretched.”

In a particularly worrying twist, the South African middle class – who have traditionally managed their debt well, Slot says – are instead using it to supplement their lifestyles.

“Many have between seven and 11 credit agreements – and you can’t service that.”

Jacques Taljaard is living proof that debt isn’t just knocking at middle class South Africans’ front doors in 2015 – it’s barged right into their homes.

Taljaard’s company, JTL Tracers, repossesses about 1?800 cars in the Western Cape and more than 3?000 in Gauteng each month.

The company is one of several that works on behalf of all South Africa’s major banks, and mostly repossesses what Taljaard calls “middle class cars” – Fords, Toyotas, Nissans, BMWs – with an occasional Ferrari or Porsche on the list.

Taljaard says as more people battle with their monthly car instalments, banks are opting to restructure debt instead of repossessing cars.

If not for this shift, Taljaard believes many more middle class South Africans would have lost their cars already.

Throw in car repayments with this week’s fuel-levy hike – economists are predicting a petrol-price hike this week of between 70 and 90 cents a litre – along with rising electricity, and it’s clear ordinary South Africans will have to pinch their pennies harder than ever.

There are also school-fee and medical-aid hikes, factors economist Chris Hart from Investment Solutions says are conspiring to push many middle class families over the edge.

Data from debt-collection company Ultima-Collect also confirm the middle class is struggling.

The company’s Connie Greyling tells City Press most middle class people fall into debt because of school and university fees, gym contracts and doctors’ fees.

“More than 60% of the people I am chasing are middle class. I have more than 3?000 people I am chasing at the moment,” she says. Greyling believes the middle class is so vulnerable even a 25-basis-point interest rate increase will make it impossible for people to manage their commitments.

Jacolize Meiring, of the Bureau of Market Research at Unisa, tells City Press the latest Financial Vulnerability Index, which was released in January, shows consumers feel financially exposed.

The index measures consumers’ perceptions of their financial status and results are grouped into three categories: vulnerable, exposed and secured. “Consumers feel they are not out of the woods yet. They still feel mildly exposed. They don’t feel they are in control of their finances,” Meiring says.

Lebogang Selibi, spokesperson for the National Credit Regulator, gives several common reasons

for bad debt:

.?Bad planning;

.?Peer pressure;

.?“Wanting to live in the first-class lounge”;

.?Interest rate hikes;

.?Retrenchments;

.?Ignorance; and

.?Divorce.

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