Consumer debt outlook for 2022

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With annual consumer price inflation in South Africa reaching 5.9% in December 2021 (the highest annual rate since March 2017) and the SARB (South African Reserve Bank) announcing a 25 basis point increase in the repo rates, consumers will really have to work their finances carefully. The price of fuel, oils and fats, meat, wine, milk, eggs and cheese and electricity all increased from December 2020 to December 2021, and with further increases in fuel and electricity expected, it would be a good time to obtain its house financing in order to avoid going into more debt. But despite the pessimism, we at National Debt Advisors (NDA) have seen a positive shift in consumer debt behavior over the past two years, which we believe will continue this year.

The current economic environment is impacting debt affordability

While South Africa’s unemployment rate has skyrocketed and wages are trending down, affordability has not been in our favor over the past couple of years. The only benefit of this is that it has helped ease debt levels as banks are not lending due to affordability issues for consumers.

According to the National Credit Regulator (NCR), the overall level of credit impairment has remained fairly stable but could worsen as payment holidays and debt relief measures introduced during the pandemic come to an end. In a warning statement ahead of the holiday season, the NCR says just over 10 million people nationwide have bad credit histories. This represents 38.41% of the 26 million active consumers in credit, including approximately 61.59% or 16 million in good standing.

Recently, Central Bank data revealed that the ratio of household debt to disposable income stood at 67.8% in the third quarter. Indebted households would do well to control their debt, to better cope with higher inflation and rising prices.

Fortunately, for consumers who are at their wit’s end with their payment holidays and debt relief measures, but are still earning an income, there is always the option of seeking the help of a debt counselor. NCR registered.

South Africans don’t seem to spend on revenge

Unlike our counterparts around the world in Europe and North America who have benefited from a gigantic fiscal stimulus package, sky-high vaccination rates and a booming summer, we still have no these advantages in South Africa. This means that our consumers will undoubtedly take longer to return to a healthy level of debt and recover financially. However, I have no doubt that our consumer market will start to get there in the coming year.

Some of the unhealthy spending trends we’ve seen in the rest of the world appear to have been significantly more subdued locally. The rest of the world has been locked down and paid to stay home much longer than we were here in South Africa. Most consumers in the rest of the world emerged from strict lockdowns (lasting up to eight or nine months) with pockets full of money and a desire to live. This has caused many countries to face rising prices for goods and services through hyperinflation – a trend that has fortunately been spared us.

Overall, responsible consumer financial activity appears to be on the rise. Last year was decidedly better than 2020, and 2022 should be better than 2021. If we look at how quickly the world has rebounded and the new breath we have gained as a country, we can expect the things are accelerating. relatively quickly from an economic point of view.

Just because you can afford more; doesn’t mean you should spend more

With that in mind, I have some advice for South Africans as we move towards economic recovery.

Look to save money across all your financial platforms. You should check your auto insurance, life insurance, and medical aid to make sure you’re getting the best rates and deals. You should also save for retirement and not take on too much debt.

Many people who never thought they would see themselves in debt have fallen behind and unfortunately many have become over-indebted. Seeking the right help, at the right time for the right process is essential to getting debt under control.

It will be a difficult year for many of us, but I remain hopeful. We have done so far.

Sebastien Alexanderson, CEO of National Debt Advisors

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