Up to our ears in debt, it seems South African consumer appetite for credit has not diminished. Despite a flat economy, consumers owe a total of R1.9trillion – more than R260billion of which is unsecured credit for credit cards, retail accounts, personal and payday loans, while around R959bn is owed for mortgages. 

The value of new credit granted increased from to R134.71bn for the second quarter of this year. And the demand for new credit is rising: in the second quarter of this year, over 11million applications were made for new credit, with more than half of those, or 55.44% turned down.

With the cost of living increasing, high unemployment rates and a salary depression, those turned down for loans by credit providers are instead likely to turn to loan sharks for survival.

The latest figures from the National Credit Regulator’s (NCR) Consumer Credit Market Report and Credit Bureau Monitor are a mixed bag of reasons for mild optimism and areas of deep concern. The reports, based on the data submitted to the NCR by registered credit providers and credit bureaus, are based on credit market information from March to June this year. The numbers show more credit was extended in the second quarter of this year, with unsecured lending increasing, but also that consumers are servicing their debt.

The credit bureaus are now holding records for fewer credit-active consumers (25.1million in Q2, which is down 2.31% on the previous quarter).
However, the number of consumers with impaired records rose by 83151 to 10.23million.

Falling behind

There are now 25.1million credit-active consumers in the country. But more than 40.8% consumers have impaired records: about 23% of them are at least three months or more in arrears, 12.7% have adverse listings against their names, and 5.1% of consumers have judgments and administration orders against them.

Fewer consumers are classified as being in good standing in the second quarter: that number decreased by 677026 to 14.87million, which is just under 60% of credit-active consumers.

The number of impaired accounts has decreased from 21.53million to 21.16million in June this year, a decrease of 366803 quarter-on-quarter, but an increase of 2095842 year-on-year. More than 80.12million accounts are on record at the credit bureaus. The number of credit reports issued to consumers increased from 208771 to 248785. Just over 75.6% of credit reports were issued for free, with consumers taking advantage of that free annual report.

New credit granted is up by 5.35% quarter-on-quarter from R127.86bn to R134.71bn. More credit agreements were entered into during that period, increasing by 11.47% from 4.19million to 4.67million.

More consumers might be qualifying for credit, but the sectors that saw real growth were short-term and developmental credit, which includes loans for education, small businesses, to build, or for low-income housing.

Secured credit did see growth too, with new mortgages granted up by R4.94bn (14.03%) quarter-on-quarter and by R9.66m year-on-year.

Secured credit is dominated by vehicle finance, which increased by R1.35bn quarter-on-quarter but decreased by R337.69m on last year.

Unsecured credit increased by R392.17m in Q2 alone – an increase of R2.64bn year-on-year. The unsecured credit debtors book increased by R4.8bn for the quarter and by over R27bn year-on-year. Enquiries made on consumer records also increased for the quarter, with over 22.7million enquiries made at the credit bureaus due to consumers seeking credit, with 50.28million enquiries made for tracing or debt collection purposes, which is a 38.8% increase in that quarter.

There were also 37040 disputes lodged on credit information held on consumer records for the quarter ended June of this year, an increase of 13.18% year-on-year.

More disputes were resolved in favour of complainants (26875), compared to disputes where credit records remained unchanged (6767).

The regulator’s chief executive officer, Nomsa Motshegare, said they have noted a seasonal uptick in credit extension. “With the rising cost of living, some consumers find it difficult to make ends meet.”

Motshegare says those who are battling to meet their debt obligations should consider going under debt counselling. “Debt counselling is a debt relief mechanism offered by the National Credit Act to ease the burden on over-indebted consumers. It also offers consumers protection from legal action while they are under debt counselling,” Motshegare explains.