Are South Africans living beyond their means or just struggling to keep their heads above water amid the high cost of living?
That’s the question analysts are asking following a World Bank study published this week, ranking South Africans as the biggest borrowers in the world.
It states that 86% of South Africans borrowed money between 2013 and 2014.
The report, titled ‘Global Findex database’, tracks how people use financial services worldwide, how they save, borrow, manage risk and make payments. One hundred and fifty thousand people over the age of 15 were interviewed and 140 different economies surveyed.
Countries that came close to South Africa’s ranking were Iran at 80%, Kenya at 79%, Niger at 71%, Botswana at 69% and Zimbabwe at 62%.
According to the study, 71.2% borrowed money from family and friends as opposed to looking to financial institutions for additional funds. This despite 70% having accounts at a financial institution, where only 12% sought out financial assistance.
What is the money used for?
According to the study, 18% of South Africans borrow money to cover health care costs, 9.2% to buy houses and 7.5% to start businesses or to fund education.
The study also indicates that at least 30% of adults in South Africa said they would be unable to raise funds in a crisis.
Debt management company Debt Busters says this can simply be attributed to the high cost of living in South Africa, which often outweighs the income of most people in country.
The company’s Damon Sivitilli highlights that people spend this money for the pure purpose of survival or to live a life of luxury.
He warns that anyone falling in those categories is likely to end up in debt.
Gary Kale of the Money School says the reality is consumers either have to cut down on their spending or borrow.
He says this often lands many in debt, further indicating that half of the country’s credit active consumers are over-indebted.
Kayle says many consumers spend about 76% of their income on paying debt.
He cites a statement by the International Monetary Fund earlier this year, indicating that high household indebtedness could pose a threat to an already sluggish economy.
Kayle further adds that most South Africans who find themselves in debt are ill informed about how to have a healthy relationship with money.
He says in cases where the income is insufficient to pay all incurred debt, some consumers acquire more debt in the form of loans.