E. West
23 October 2009
Johannesburg — OVERLY indebted South Africans are making progress on reducing debt, but the number of people struggling to pay their bills is still rising.
Creditors had paid back R40bn in February, rising to R97bn in August and R107bn last month , Consumer Assist CEO Andrew Snyman says.
Consumer Assist is SA's largest debt counselling company. The figures are based on data from debt counsellors, the National Credit Regulator and payment distribution agents.
"Debt counselling is most definitely working, it is injecting significant amounts of money back into the economy each month, which helps businesses stay afloat and jobs to remain secure, but also forms an important educative tool in teaching consumers how to manage money effectively," says Snyman.
He disclosed these findings at a conference on debt management in Sandton this week. The research, which canvassed more than 10000 consumers nationwide by Consumer Assist and associated debt counsellors, showed men were more likely to come forward for help: 58,12% of debt counselling applicants were men and 41,88% were women.
He says a major reason for the increase in repayments is the continuing increase in clients struggling with debt, with the industry now dealing with 10000 applications for debt counselling each month, from 7000 a month in the previous quarter.
Another reason is that, two years after the introduction of debt counselling, people are beginning to trust the process.
At least 80% of the people applying for debt review were earnest about restoring their financial health.
Nevertheless, the number of people migrating downwards to a worse debt standing was also still on the increase.
Snyman says there is an increasing number of people with higher incomes -- earning R700000 or more a year, who typically own two houses -- applying for help with their debt.
These consumers typically have ridden through the recession so far using cash flow from bond and credit card facilities established some time ago , but are finding it difficult to access further loans because of the National Credit Act.
White people dominated those undergoing debt counselling, with those aged 31-40 across all race groups most indebted.
Black consumers would often shy away from debt counselling when they discovered they could not incur more debt until their debts were paid.
"This is a matter of education; there needs to be a stronger focus on money management, budgeting and overcoming debt in all communities. Ideally, it should start in schools and be reinforced by financial wellness programmes in the workplace," Snyman says.
He says only a very small number of Asian individuals seek debt counselling as they often have strong family bonds and community structures to assist them to get out of debt.
Those people aged 17-20 and 71 and older are the least indebted age groups, with marginal numbers under debt review. The oldest person under debt review with Consumer Assist was 81 years old.
The amounts of money owed by consumers were in most instances very low, with 47% owing less than R3000; 23% paying back under R5000; 21% owing creditors less than R10000; 6% in debt for less than R15000; while only 2% owe close to R20000; and just 1% owe as much as R65000.
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