Evidence SA consumers battling to pay for major purchases, taking on more debt


It appears that struggling South African consumers are battling to repay their major purchases and taking on more credit to fund their lifestyles, according to the findings of the latest Experian Consumer Default Index (CDI).

The index indicates that households are under increasing financial strain, and that the rate of first-time credit defaults has escalated, particularly over the past nine months.

The CDI tracks 14.2 million consumers with 17.9 million active credit card, personal loan, vehicle loan and/or home loans with a total of R1.57trn in outstanding debt.

David Coleman, chief data officer at Experian SA, said the index has been tracking higher over the past nine months. Consumers have come under pressure from the one percentage point VAT increase and recent fuel price hikes, which have been exacerbated by the weakened economy and rising unemployment.

The impact of this can be seen in the rise in the percentage of total credit active consumers that are classified as impaired or in default, from 43.89% in March 2018 to 45.45% in June 2018.

The Experian CDI for vehicle loans in June was 3.99% – its highest level yet. Credit cards were at 6.65% and personal loans at 8.41%.

Consumer segments

A closer look at different consumer segments shows young couples and retirees living in small apartments in city centres and embracing the "convenience and lifestyle" that these have to offer had the lowest CDI of 2.09% in June 2018. This is an improvement on June 2017’s 2.34%.

“The convenience offered by ‘live, work, play’ neighbourhoods – or at least living close to amenities - has certainly helped this segment, which is not as negatively affected by the fuel price hike for instance,” said Coleman.
Middle-aged educated families with mid-to-high income living in suburbs around industrial and mining areas also recorded an improved CDI of 3.52% in June 2018 compared to 3.67% in June 2017.

The worst first-time credit defaults for personal loans were young or single co-habiting couples reliant on social grants in one-or-two roomed informal dwellings – with a CDI of 14.5% in June 2018 compared to 10.6% in the previous year.

This is the highest CDI level across all products and segments, and points to the wide-spread impact that the VAT increase has had on disposable incomes. 

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