Alfred Ramosedi | Chief Executive Officer | Bayport Financial Services | mail me |
It’s still early enough in the year to review your spending habits, getting your finances into shape and implementing a financial plan that will ensure you get back on track.
According to the 2019 Consumer Credit Market Report carried out by the National Credit Regulator, 59% of employees are stressed about their finances with less than 15% of South Africans able to afford retirement.
Additionally, 49% of South African consumers are more than one month in arrears with an account and consumers spend more than 72% of their income on debt repayments. This leaves very little wiggle room in the disposable income department and makes saving almost impossible.
Impact on productivity and efficiency in the workplace
This particular conundrum affects employees across the board and has a negative impact on productivity and efficiency in the workplace.
The question therefore begs whether employers put sufficient effort into creating programmes that educate, mentor and equip their employees to take control of their finances?
There is a school of thought that believes it is not the employers’ responsibility to help out in these personal arenas, but, how can we not help them?
Debt, in today’s economy, is not easy to manage. The problem is exacerbated by the ease with which people are able to access credit and, by extension, how they use that money.
Funding a lifestyle on credit is dangerous, as it only takes one mishap to get you into trouble. People are living from paycheck to paycheck and are indebted to the point where their income barely covers monthly repayments. Funding a lifestyle through credit becomes a really bad decision when you perhaps don’t get the raise you expect, the bonus you were counting on or, worst of all, lose your job.
When you lose your income security you are immediately in a bad place. If you are living hand to mouth to service your debt, there is no breathing room at the end of the month should anything go wrong.
This is probably the time when you would really need a loan which formal credit channels will often deny and the only recourse some people have is to make use of informal lenders – loan sharks – that are unregulated and cause more stress and heartache than they are worth.
The anxiety associated with being indebted to unregulated, and often unscrupulous creditors affects an individual’s mental attitude, well-being and ability to concentrate on work.
Different categories of indebtedness
- those in good standing with creditors
- distressed individuals
- the over-indebted
The issue with the over-indebted individuals is that they are blacklisted on credit bureaus.
The problem facing the country it must be understood that, currently there are 26 million active credit users in South Africa, of which only 16 million are formally employed, and only eight million work for VAT registered companies.
Close to 50% of these are at least one month in arrears with one of their payments. This doesn’t mean that the remaining 50% are not under pressure. There is very little disposable income even with those who have a good credit rating and are in good standing with their creditors.
Essentially, at any company, if you look closely at your staff, at least six out of 10 will be struggling to make ends meet financially each month. This is across the board from entry level positions to management.
In conclusion
People to be guided out of judgements, clear black-listings, and formulate an affordable and realistic payment plan that doesn’t cripple the debtor as society needs credit-active people.
This needs to be done through formal processes with repayments that are affordable, which will in turn, enable personal growth and wealth creation. Unless you offer real solutions to everyday problems the market will implode.
