Owe the bank money? Well, the bad times are only beginning

1 year ago written by

SA’s recent downgrade to junk status by international rating agencies means South Africans who owe the bank money will battle even more to make ends meet.

Credit bureau Compuscan says the financial pressure on these individuals and families is going to increase following the downgrade of the country’s sovereign status to junk status by two ratings firms. This simply means that loans are  likely to become more expensive.

BusinessTech.co.uk reports companies will most likely also need to pay more to service debt. This will eat into their profits and increasing pressure on consumers as they offer less value for money.

Jacobus Eksteen, a senior data analyst at Compuscan says in a statement “further, economic growth stems from consumers’ ability to spend and with this being impacted, the economy will also be negatively affected, resulting in fewer jobs and less disposable income amongst consumers”.

Compuscan’s data on consumer credit behaviour for Q4 2016 showed that South Africans under the age of 40 accounted for 75% of all short-term fixed-term loans extended by lenders as at the end of 2016.

Eksteen noted that here was a 14% increase from Q3 2016 to Q4 2016 in the total number of short-term fixed-term loans that had been taken out by consumers.

Most notably, almost 50% of all short-term fixed-term loans greater than R4,000 and less than R8,001 belonged to consumers aged 18 to 40 as at the end of Q4 2016. “We also noted a major quarter-on-quarter increase in the number of accounts in this category that had been extended to consumers in this age group,” the analyst said.

“It can be assumed that this age group had been under financial pressure and relied on access to short-term fixed-term loans (R4,001 and more), or had a preference for this loan type, to cover shortfalls,” Eksteen said, further suggesting that young consumers may have used these funds to cover their basic expenses such as fixing cars, buying groceries, holiday-season spending and the likes.

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