Real Estate Investor Magazine South Africa April 2016 | Page 21

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s a result of interest rate hikes, weakening
currency, high inflation, low wages, droughts
and unemployment, South Africans are taking
more loans to supplement their income. According
to the World Bank, South Africans were the biggest
borrowers in the world in 2014. They have already
accumulated more than R1, 63 trillion of unsecured
debt from various financial institutions with credit
cards, store cards, bank overdrafts and personal loans,
but excludes debt accumulated from friends, family and
private micro-lenders.
SA has 23,37 million credit active consumers, of
which 12,8 million are in good standing and 10,5
million have impaired records. Because of highly
restrictive credit regulations they are excluded from
getting more credit due to impaired credit records.
More than 11 million with an average of R70, 000
unsecured debt per credit active consumer and are
struggling to make payments. Most are flat broke at
the end of the month after all the money has been
distributed.
This excludes secured mortgage bond debt, which
amounts to almost R857 billion while asset backed
credit amounts to R357 billion. Banks grant the biggest
share of credit followed by retailers and then non-bank
financiers. Defaults are growing and are becoming a
bigger problem for businesses and the over-indebted
consumer. The Government has done what it can
about over-indebtedness, reckless lending and limiting
the amount that creditors can claim. Although the
National Credit Act (NCA) was introduced in June
2007 to prevent reckless lending, relieve pressure on
consumers and introduce debt management services to
assist the consumer, the results show that the situation
is deteriorating due to weak economic circumstances.
Also rectifying your credit rating takes an exceptional
amount of time, often years, to fix, especially if legal
action has been taken against you.
Is the NCA and traditional credit system working
in SA? Not at all, says Tony Webbstock, attorney
specializing in Debt Management. “As a result of a
tightening economy with increasing interest rates,
high inflation on food and living expenses has put
the consumer into a tailspin and also has put both
consumers and businesses into a highly indebted
situation. The result is that businesses are becoming
more aggressive and unscrupulous in their dealings with
the uninformed consumer and small businessman to
collect outstanding debt.” The fact of the mat \