Both the South African government and its citizens are forced to allocate more of their resources towards debt rather than to education or housing. This creates a challenge to maintain healthy finances, leading to empty pockets and frustration.
While government is looking at ways to reduce expenditure and growing the economy, more consumers who find themselves to be over-indebted are seeking debt management solutions such as debt counselling to keep head above water.
Increased need to borrow
When the global financial crisis hit South Africa in 2008, we entered a recession for the first time in two decades. Since then, government spending outpaced revenue, leading to an increasing need to borrow.
According to Statistics South Africa (StatSA), the South African government owed R2,2 trillion in gross loan debt in 2016/17. If South African citizens had to settle this debt, each adult in the country would have to cough up over R70,000.
Like any other client, the South African government must pay interest on its debt and, during the above mentioned timeframe, this amounted to 9.2% of general government expenditure – or R146 billion.
It is true that the government spent more money paying off the interest on its debt than on tertiary education or housing, which respectively amounted to R77 billion and R69 billion in the same year.
Increased living expenses
But that’s also the reality for many South Africans who are struggling with their personal debt. They are not able to prioritise their housing or education because of too much debt and increased living expenses.
Things could get even tougher now with another petrol price increase on top of the 14% price increase in electricity in April.
South Africa’s interest rate on its debt (which was 9%) was 3% higher than the average amount of national governments around the world, which stands at 6.5%. And according to the South African Reserve Bank (SARB), household debt has increased in the fourth quarter of 2018.
In the Quarterly Economic Review, which was released by SARB in March, it states that 73% of household’s disposable income is already spent on debt. Our stats also show that 58% of the credit active people in South Africa struggle to meet their monthly debt repayments, with 39% of credit consumers having at least one account in arrears already.
Debt management remedy
We receive thousands of enquiries per month from over-indebted South Africans who don’t know how to move forward with their lives. Instead of dedicating their time to building their futures, they are forced to scramble for resources to service their debt.
Luckily many of them who do use debt counselling as a debt management remedy experience the benefit of the process and can work towards a better financial position.
The thousands of clients that already received clearance certificates and could lift the burden of debt are testament to the fact that the process works.