News / Africa

South African Consumer Debts Mount as Economy Grows

Customers are seen at a suburban autobank in Johannesburg, South Africa, April 1, 2010.
Customers are seen at a suburban autobank in Johannesburg, South Africa, April 1, 2010.
As South Africa's economy has grown, so has consumer debt. Forty-seven percent of South Africans with credit have impaired records. A substantial amount of that bad credit is tied up in high-interest, unsecured loans.

Imagine you want to get a quick infusion of cash, but your income isn't enough and you don't have the savings.

Enter the unsecured loan. Without money down, you can get an unsecured loan, meaning you're taking out money without collateral.

For the average consumer, this kind of loan is tempting but can be a handful once repayment begins.

Louisa Hetisani, manager for Credit Information & Research at the National Credit Regulator, said these loans pack a high interest rate.

"Currently the highest rate that can be paid for these unsecured personal loans is higher than any other kind of credit," said Hetisani. "It's 31 percent."

Cell phones are serving as a bank in your pocket, providing virtual accounts for South Africans excluded from the financial mainstream, Johannesburg's Soweto township, October 19, 2005.Cell phones are serving as a bank in your pocket, providing virtual accounts for South Africans excluded from the financial mainstream, Johannesburg's Soweto township, October 19, 2005.
x
Cell phones are serving as a bank in your pocket, providing virtual accounts for South Africans excluded from the financial mainstream, Johannesburg's Soweto township, October 19, 2005.
Cell phones are serving as a bank in your pocket, providing virtual accounts for South Africans excluded from the financial mainstream, Johannesburg's Soweto township, October 19, 2005.
Since 2007, the number of people using credit in South Africa has increased from 16.8 million to 19.6 million.

The amount of impaired credit records - people who are behind on payments by at least three months - has increased from 36 percent to 47 percent over the same time.

While mortgages are paid on schedule about 90 percent of the time, unsecured loans are paid on schedule only about 75 percent of the time.

Clark Gardner is CEO of Summit Financial Partners, which helps consumers become financially responsible. He said, "It is a function of an ignorant consumer that doesn't understand the consequences of credit because their parents never had it and they never thought about how to manage credit responsibly. And the rest is pure opportunism - preying on those ignorant consumers."

These loans, because they don't require money down, are most attractive to lower income groups.

More than 60 percent of these loans are given to consumers who make less than 10,000 rand or about $1,100 a month, according to a report from South Africa's Credit Bureau Monitor.

Both the Credit Bureau Monitor and Summit Financial have lobbied on behalf of consumers for more government oversight on the processing of unsecured loans.

Hetisani said the loans aren't necessarily bad, but need to have more safeguards for consumers. "We understand that consumers need to access credit in order for them to improve their lives," she said.

"All we are saying is both credit granting and credit use should be done in a responsible manner," she added.  "We have come out with some recommendations, which we have made. One of them is, for example, introducing affordability assessment guidelines, but that is still in the pipeline."

In the meantime, while many banks are still offering such loans, some are cutting down on them. African Bank, known as Abil, and Capitec Bank, two banks which have granted many unsecured loans, have said that they will be more selective about those who qualify.

Meanwhile, the Treasury and Banking Association of South Africa are looking at measures to promote more responsible lending.

You May Like

Photogallery Oxfam: Ebola Could Be 'Disaster of Our Generation'

Meanwhile, Fidel Castro, the former leader of Cuba, says the Caribbean island nation will 'gladly cooperate' with the US in the fight against Ebola in West Africa More

Multimedia Kobani Fighting Sends 400,000 Refugees to Turkey

Refugees receive help from Turkish authorities and individuals, but say much more is needed More

India’s Ruling Nationalist Party Makes Gains in Regional Elections

Bharatiya Janata Party’s huge margin over its rivals puts it on course to form governments in the northern Haryana and western Maharashtra states More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Exclusive: American Joins Kurds' Anti-IS Fighti
X
Zana Omer
October 18, 2014 6:37 PM
The United States and other Western nations have expressed alarm about their citizens joining Islamic State forces in Syria and Iraq. In a rare counterpoint to the phenomenon, an American has taken up arms with the militants' Syrian Kurdish opponents. Elizabeth Arrott has more in this exclusive profile by VOA Kurdish reporter Zana Omer in Ras al Ayn, Syria.
Video

Video Exclusive: American Joins Kurds' Anti-IS Fight

The United States and other Western nations have expressed alarm about their citizens joining Islamic State forces in Syria and Iraq. In a rare counterpoint to the phenomenon, an American has taken up arms with the militants' Syrian Kurdish opponents. Elizabeth Arrott has more in this exclusive profile by VOA Kurdish reporter Zana Omer in Ras al Ayn, Syria.
Video

Video South Korea Confronts Violence Within Military Ranks

Every able-bodied South Korean male between 18 and 35 must serve for 21 to 36 months in the country’s armed forces, depending upon the specific branch. For many, service is a rite of passage to manhood. But there are growing concerns that bullying and violence come along with the tradition. Reporter Jason Strother has more from Seoul.
Video

Video Comanche People Maintain Pride in Their Heritage

The Comanche (Indian nation) once were called the “Lords of the Plains,” with an empire that included half the land area of current day Texas, large parts of Oklahoma, New Mexico, Kansas and Colorado.The fierceness and battle prowess of these warriors on horseback delayed the settlement of most of West Texas for four decades. VOA’s Greg Flakus reports from Lawton, Oklahoma, that while their warrior days are over, the 15,000 members of the Comanche Nation remain a proud people.
Video

Video Turkey Campus Attacks Raise Islamic Radicalization Fears

Concerns are growing in Turkey of Islamic radicalization at some universities, after clashes between supporters of the jihadist group Islamic State (IS) or ISIS, and those opposed to the extremists. Pro-jihadist literature is on sale openly on the streets of Istanbul. Critics accuse the government of turning a blind eye to radicalism at home, while Kurds accuse the president of supporting IS - a charge strongly denied. Henry Ridgwell reports from London.
Video

Video Syrian Defector Leaks Shocking Photos of Torture Victims

Shocking photographs purporting to show Syrian torture victims are on display at the U.S. Holocaust Memorial Museum in Washington. The museum says the graphic images are among thousands of photographs recently smuggled out of Syria by a military policeman-turned-defector. As VOA reporter Julie Taboh reports, the museum says the photos provide further evidence of atrocities committed by the government of Syrian President Bashar al-Assad against its own people.
Video

Video Drought-Stricken California Considers Upgrading Water System

A three-year drought in California is causing a water shortage that is being felt on farms and cities throughout the state. As VOA's Mike O’Sullivan reports, water experts, consumers and farmers say California needs to make changes to cope with an uncertain future.
Video

Video TechShop Puts High-tech Dreams Within Reach

Square, a business app and card reader, makes it possible to do credit card transactions through cell phones. But what made Square possible? VOA’s Adrianna Zhang and Enming Liu have the answer.
Video

Video Church for Atheists Goes Global

Atheists, by definition, do not believe in God. So they should have no need of a church. But two years ago, a pair of British stand-up comedians decided to create one. Sanderson Jones and Pippa Evans told the BBC they envisioned “something like church but without God". Their “Sunday Assembly” movement has grown from a single congregation in London to dozens of churches around the world. Reporter Mike Osborne visited with the members of a Sunday Assembly that now meets regularly in Nashville.
Video

Video Robot Locates Unexploded Underwater Mines

Many educators believe that hands-on experience is the best way to learn. Proving that the method works is a project developed by a group of students at the Stevens Institute of Technology, in Hoboken, New Jersey. They rose up to a challenge posted by the U.S. Department of Defense and successfully designed and built an underwater robot for locating submerged unexploded ordnance. VOA’s George Putic reports.
Video

Video Liberia's JFK Hospital Reopens After Temporary Ebola Exposure

JFK Hospital is Liberia’s largest and one of its oldest medical facilities. The hospital had to close temporarily following the deaths of two leading doctors from Ebola. It is now getting back on its feet, with the maternity ward being the first section to reopen. Benno Muchler has more for VOA News from Monrovia.
Video

Video Hong Kong Protests Expose Generation Gap

Most of the tens of thousands of protesters in Hong Kong are students seeking democracy. Idealistic youths say while the older generation worries about the present, they are fighting for the territory's future. VOA's Daniel Schearf reports from Hong Kong.
Video

Video Liberians Living in US Struggle From Afar as Ebola Ravages Homeland

More than 8,000 Liberians live in New York City, more than in any other city outside of Liberia itself. As VOA’s Bernard Shusman reports, with the Ebola virus ravaging their homeland, there is no peace of mind for these New Yorkers.
Video

Video Kurds See War-Ravaged Kobani As Political, Emotional Heartland

Intense fighting is continuing between Islamic State militants -- also known as ISIS or ISIL -- and Kurdish forces around the Syrian town of Kobani, on the Turkish border. The U.S. said it carried out at least nine airstrikes against Islamic State positions Friday. Meanwhile the U.N. has warned that hundreds of civilians would be massacred if the town falls to the militants. Henry Ridgwell looks at the strategic significance of the city.

All About America

AppleAndroid