Ian Wason CEO of DebtBusters, South Africa’s largest debt counsellor, noted: “In a recent review of credit life charges by mainstream credit providers, DebtBusters uncovered some horrific practices in the marketplace. Findings indicate that although some credit providers, particularly the banks, fall below the DTI’s proposed R4.5 per R1000 of deferred amount, almost all other credit providers are charging far in excess of this, with the average ‘non-bank’ consumers paying over R12 per R1000 borrowed.”
11 February 2016
Today President Jacob Zuma will deliver the State of the Nation Address (SONA), a time in which many South African’s will be waiting in bated breath to find out what’s in store for the country’s prosperity and its citizens in 2016.
There is always an air of expectation and hope that what the President will say will lead to opportunity and change. But more than expectation is scepticism, as corrective measures to improve on existing policies and their failures will most definitely be scrutinised. More so now with the theme of the SONA 2016 being “Following up on our commitments to the people”, many South Africans are beginning to lose faith.
DebtBusters, South Africa’s largest and most trusted Debt Management Company, stresses that 2016 needs to be the year that focuses on unemployment, education and over-indebtedness as the foundation to increasing the country’s economic prospects.
Unemployment remains high
With 25.5% of South Africans unemployed (as of July 2015), unemployment will be a key focus point for President Zuma and his cabinet to address and will need to be duly improved. Ian Wason, CEO of DebtBusters, says “South Africans without work put government under more pressure every year for service delivery, as they are unable to afford day to day living costs. More so, they put pressure on their families and often their children to work and support them instead of pursuing their own education and career goals”.
Education standards have dropped
Not only did 2015 see a drop in the matric pass rate, from 70.7% compared to 75.8% in 2014. Wason says, “South African school leavers lack both the means and the foundations for basic financial management. This paves the way to poor money management early on in their adult lives and develops bad financial habits later on, such as accruing debt and missing account payments. This inevitably leads to a ‘debt-end’ where these youngsters (in their early 20’s) are subjected to more borrowing to repay existing debt and to meet day-to-day obligations”.
SONA needs to address the crux of poor education levels and more specifically poor financial literacy levels and its direct impact on unemployment and economic growth.
Wason adds, “South African consumers are addicted to debt. Not good debt, like a mortgage or a loan for the expansion of their business, or even an educational loan, but to shorter term expensive debt. This addiction (driven by desperation for cash) has led to the increase in pay day loans, with over two million South African’s likely to be over-indebted and relying on ‘pay day’ loans every month”.
Over-indebtedness has a knock-on effect and contributes to stagnating economic growth. Consumers who are over-indebted will halt any future plans to further educate themselves. In so doing they lack the basic requirements of many employers and limit their chances of finding employment.
DebtBusters has seen an increase in enquiries for debt counselling, up 144% compared to last year. With the latest statistics from the NCR indicating that more than half of SA’s credit active consumers struggling with their monthly debt obligations, this should announce alarm bells for Government to address the poor state of financial affairs in consumers’ households.
“Government needs to place a great deal of emphasis on actively decreasing the country’s unemployment situation, educating South Africans in financial literacy and eradicating the high levels of over-indebtedness”, ends Wason.