SA household debt drops first time in 18 years

As strict restrictions to limit the spread of the coronavirus affected spending and savings patterns.
Image: Shutterstock

South African household debt fell for the first time in almost two decades in the second quarter as strict restrictions to limit the spread of the coronavirus affected spending and savings patterns.

Household debt dropped to R2.27 billion from R2.3 billion in the previous quarter, according to central bank data. That’s the first time the measure declined since the third quarter of 2002 and is consistent with a sharp contraction in nominal spending and a decrease in the outstanding balances of most categories of credit extended to households, the South African Reserve Bank said in its Quarterly Bulletin released Tuesday.

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Still, the ratio of household debt to nominal disposable income jumped to 85.3% from 73.6% in the three months through June. Statistics agency data due later Tuesday is expected to show that the unemployment rate rose to a record 34.9% in the second quarter as many firms reduced staff or closed down permanently because of the restrictions.

A nationwide lockdown restricted activity in Africa’s most industrialised economy from March 27 and led to an annualised quarter-on-quarter contraction of 51% in gross domestic product in the three months through June. While a gradual and phased reopening of the economy began from May 1, business and consumer confidence continue to languish at multi-year lows.

South Africa’s economy entered an 82nd month of a weakening phase in September, extending its longest downward cycle since World War II, according to central bank data.

Portfolio outflows fell to R54.8 billion from a record R97.6 billion in the previous quarter. That was due to net sales of debt and equity securities by non-residents, as well as the redemption of two government bonds valued at $500 million and 30 billion yen ($284 million).

Foreign direct investment inflows totalled R17.4 billion, largely due to debt funding that international companies provided to their South African subsidiaries.

© 2020 Bloomberg

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Which planet do you live on?

So what’s the big deal. Debt decreased by ZAR 30 million.

Probably the 40% unemployed probably repaid debt.

The following quote is so well hidden it must be on purpose: ‘the ratio of household debt to nominal disposable income jumped to 85.3% from 73.6% in the three months through June.’ That is a big deal!

Should that read billion or trillion? 2,300 million on say 5 million middleclass and above households is impossibly low. A tank of fuel

End of comments.

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