South Africans have headed into 2016 with a debt hangover that is going to have a huge impact, compounding the fact that South Africans were rated as the biggest borrowers in 2014.
This is according to Andrew van Niekerk, MD of Teleforge Communications, a company providing a myriad of solutions to debt collection companies, including call centre solutions.
“Experts predict that 2016 will be extremely tough on the pocket and that consumer debt is in a state of crisis. They cite a number of factors, including a bleak job outlook and festive season splurging as factors that will hit consumers where they feel it most,” says van Niekerk.
In 2014, South Africans were the world’s biggest borrowers, according to the World Bank. Its Global Findex report revealed that 86% of South Africans took out a loan, more than double the global average of 40%.
In addition, more than half of homeowners are battling to pay their home loans, and just under 60% battle to meet credit card payments. Fewer than 25% have any money left at the end of the month.
“People aren’t managing their debt properly and are seriously battling to survive. We are in a situation where people are borrowing money just to put food on the table.
“Moreover, a lot of damage has been done due to the dramatic collapse in the value of the rand. This will mean higher interest and inflation rates – all bad news for consumers.”
But it is not just these factors which are weighing heavily on South African consumers, making it hard for them to service ballooning debt. There are also the fuel and electricity hikes.
Then there is the severe drought, which is creating food price pressures. “Many farmers have run out of money in areas like the Karoo, and are literally watching their cattle die. This type of scenario will lead to food price increases,” van Niekerk says.
There is also the threat of more interest rate hikes as the Reserve Bank tries to keep a lid on rising inflation.
“It is looking like a lethal convergence of a number of negative factors,” says van Niekerk. “And I think debt collectors are going to have to ramp up collection activities. We expect our clients, for whom we provide call centre solutions, to move into a very busy phase during the rest of 2016.”