Fresh figures from TransUnion (a credit reporting agency) have revealed new facts about South African personal debt in the first quarter of 2019. The credit agency’s report investigated consumer borrowing against property, vehicles and store cards, discovering that the average South African owes a total of R671,980 against these three products.

Property

Property loans accounted for the bulk of South African borrowing, with 1.8 million home loans currently active in the country. The average amount owing from these accounts stood at R488,931, a little under double the country’s average yearly wage of R254,300. The average amount of new property loans now stands at R736,157.

The statistics revealed that property loans are not currently growing, a factor most likely influenced by South Africa’s current economic uncertainty. In periods of unpredictability, many would-be homebuyers delay large expenses and significant borrowing. The possibility of uncompensated expropriation of land is another major factor affecting borrowing against property in the current political climate.

Vehicles

R180,962 is the current average amount outstanding against vehicles in South Africa. This figure is growing at the slowest rate since Q1 2017, indicating that consumers are not increasing their borrowing to purchase vehicles. This slow down in borrowing is the result of a number of factors, including tightening lending criteria and reduced affordability for consumers.

2.2 million accounts of this sort are currently active in South Africa, with the average amount of new loans standing at R301,063.

 Clothing

A striking 17.3 million store card accounts are currently active in South Africa. Each with an average balance of R2,087. In recent years, clothing retailers have come under increasing pressure to regulate their credit services in order to ensure the affordability of the financial products they offer to consumers. In 2015, the NCA implemented legislation requiring such companies to request proof of income before providing store cards and related products to their customers. In 2018, the industry lobbied against the new legislation, overturning the ruling and removing the requirement for more stringent affordability checks.

Are South Africans borrowing too much?

Although South African personal borrowing has declined in recent years, the country has an ongoing reputation for higher-than-average levels of household debt. These recent figures highlight that South Africans are currently borrowing from multiple sources and may need to review their use of credit products further. Previous studies have indicated that some South Africans continue to borrow inappropriately, using loans and credit products to fund luxuries such as holidays, lifestyle products, technology  and fashion.

Consolidating loans

With many borrowers holding outstanding debts with multiple companies and providers, increasing numbers are using alternative finance options to consolidate their debts. While debt consolidation is not the best solution for all borrowers, for others the process streamlines repayments by reducing the number of creditors they must service. Flexible loan providers like Wonga are increasingly working with customers keen to consolidate multiple outstanding loans into one regular repayment. Learn more about debt consolidation here.

Tom Gardner