- The pandemic has wreaked havoc on South Africans’ ability to repay debt, a new report by TransUnion shows.
- A third of clothing account holders were behind on three or more payments by the third quarter this year.
- Most credit categories saw sharp rises in non-payments, but credit cards were least affected.
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A third of clothing account holders have fallen behind on three or more payments by the third quarter this year, a new report by the credit reporting group TransUnion shows. Of the 17.2 million clothing accounts in South Africa, the average outstanding balance reached R2,100.
The Q3 2020 South Africa Industry Insights Report shows that 12% of credit cards and 22% of personal loans extended by banks were now also overdue three or more payments, which is classified as a “serious delinquency”. Almost a third of non-bank personal loans were behind on three or more payments.
Most credit categories saw an increase in serious delinquencies. Clothing accounts and non-bank personal loans saw increases of more than 6 percentage points from a year ago. Credit cards, which only increased by less than half a percent, were least affected.
“It is possible consumers are prioritising credit card payments to preserve both the utility and liquidity they provide in Covid-19 times,” TransUnion said in a statement.
The average outstanding balance on the seven million credit cards in South Africa increased by 1% over the past year to almost R18,800. The average credit line extended per credit card is around R35,000.
The average holder of a bank personal loan now has an outstanding balance of R40,000.
“In some cases, bank personal loans are being used as a payment holiday mechanism where loan balances are increased to provide liquidity. This leverage is helping consumers avoid being delinquent and at the same time is increasing overall outstanding balances (up 8.7% YoY in Q3 2020),” TransUnion found.
A TransUnion survey among South Africans shows that 85% of consumers are worried about their ability to pay bills and loans, with 29% expecting to run into a shortfall within one month.
The weak state of the economy and retrenchment fears have subdued South Africans’ appetite for new credit: the number of new bank personal loans and home loans extended in the third quarter fell by more than 60%, while new clothing accounts were down almost 70%.