The rand
  • New data from the credit record group Experian shows a strong increase in bad debts among the 2.5% wealthiest credit users in South Africa.
  • Their total new debt defaults hit R4 billion in the last three months of 2020.
  • Across all income groups in South Africa, repayments on personal and car loans took the biggest hits during the pandemic.
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Some of South Africa’s high-flying households are struggling to pay their bills, the latest report by the credit record company Experian shows.

In the three months to end-December, the top 2.5% of South Africa's credit active population saw total new defaults on debt repayments of more than R4 billion. A default is either when a debt has been unpaid for 90 days or more – or when the lender has written off the debt, or started to repossess or foreclose on the asset. Members of this group typically have an average starting home loan of more than R1.2 million and take on vehicle loans of more than R450,000. Together, these wealthy households have outstanding debt of almost R600 billion. 

Jaco van Jaarsveldt, chief decision analytics officer at Experian Africa, says it's clear that the pandemic has had a significant impact on the high income households.

"It is evident that segments of the South African credit-active population who were previously less impacted by the distressed economic environment are no longer immune to financial struggles."

Experian’s Consumer Default Index (CDI) for the richest credit users deteriorated by 13% between December 2019 and 2020. The index measures the total number of accounts that are now in default for the first time, as a percentage of the total outstanding debt.

Across all income groups, personal loan repayments have taken the biggest hit during the pandemic, the latest numbers from Experian show.

Of all the credit products, these defaults increased the most between December 2019 and December 2020. This distress shows that the pandemic continues to place pressure on many people who predominantly use personal loans for monthly expenses, says Experian. Vehicle loan defaults have also spiked.

CDI refers to Experian’s Consumer Default Index (CDI).

But defaults on home loans improved slightly from end-2019 to end-2020.

"This suggests people are prioritising paying their home loans before other commitments," says Van Jaarsveldt.

Also, defaults on credit cards and retail store accounts have improved – despite the pandemic. The positive performance of credit cards can be attributed to consumers prioritising paying their credit card debt as it most likely is their primary source of funds for daily expenses, says Experian.

Defaults on retail store accounts have improved mostly because stores and other lenders have adopted stricter criteria before they will extend credit – and this started even before the pandemic started.

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