SA consumers resort to revolving credit to afford the basics

If the first six months of 2016 are anything to go by, property owners should ensure that they have done all their homework to secure their rental income. Like getting Rentmaster to take care of it all.

As South Africans are becoming increasingly indebted, a growing percentage of income goes to servicing that debt, thereby putting greater pressure on their ability to afford the basics like rent. This trend is confirmed by the alarming 12.3% increase in tenants who did not pay their rent between December 2015 and March 2016. *

Middle income South Africans are increasingly resorting to using credit cards and store cards to maintain their living standards. This is according to the TransUnion’s latest consumer credit index, an indicator of consumer credit health.

While the index is only marginally up from the first quarter of 2016 (47.1 as compared to 46.5), the year-on-year trend does not look rosy, dropping from 55 to 47 points — a 15% decrease. **

“What we’re seeing is that economic conditions, job losses, and inflation are really weighing down on consumers and their ability to pay their bills”, said Geoff Miller, TransUnion Africa’s regional president.

According to economist Russell Lamberti, “Middle- and lower-income households were most severely affected by deteriorating household credit health”. This trend is due to those households having more exposure to unsecured lending. “During challenging economic times these households often utilise revolving credit to augment their disposable income.”

*TPN Rental Monitor, Q1 2016

**The CCI is an indicator of consumer credit health that measures the ability of consumers to service existing credit obligations within the constraints of their monthly household budget. It is based on a 100-point scale, with 50.0 the break-even level between improvement and deterioration of credit health. Any number above 50 means that consumer credit health has improved over the past year.

It measured through:

  • Loan repayment records
  • Use of revolving credit
  • Estimated household cash flow
  • Relative cost of servicing outstanding debt