Too many South Africans are slaves to debt

The country has 25m active credit consumers – and more than 10m are behind on their payments.
Many of those receiving debt counselling find themselves stressed as a result of living above their means – but at least they are doing something about it. Image: Shutterstock

If you want to know the frustrations associated with being in debt, ask 27-year-old Muzi Mehlala (not his real name). He is over-indebted, despite the fact that he has been working for a financial administrator for the past seven years. 

His salary has increased a couple of times, but he says it still doesn’t allow him to live a comfortable life.

“My salary is not enough,” he says. “I do not have the extra money lying around to buy most of my necessities.”

Clothing, furniture and cellphone accounts and a credit card are what he is a slave to.

With the interest he’s paying on the credit he has taken out, it’s no wonder he doesn’t have ‘extra money’ lying around.

He says that as a result he lives hand-to-mouth. By the end of the first week of the month most of his income is finished. He then depends on his credit card to pull him through the month.

Read: 5 common debt traps and how to avoid them

Mehlala says he regrets the day he allowed himself to fall into the trap of credit providers.

“When I started taking credit I did not know much about credit and the impact it could have in the long term,” he says.

Credit regulator findings

Mehlala is not alone. According to the National Credit Regulator (NCR), South Africans are over-indebted – and still clamouring for more credit.

Statistics released on Friday show the total value of new credit granted in 2019’s first quarter (Q1), increased by more than 5% to over R134 billion in Q2, says the NCR’s Ngoako Mabeba.

Mabeba says one million applications for new credit were made, with 55.44% turned down.

He adds that there are 25 million active credit consumers, and 10.23 million (40%) are behind on their payments.  

Read: Destroy your debt in 10 (not-so-easy) steps

“There is impairment on at least one of their accounts,” he says, adding that on average a consumer has three-and-a-half accounts.

“There are 80 million accounts in South Africa, with 21 million in arrears by three months or more.”

Mabeba adds that 12.7% have adverse listings against their names, while 5.1% of consumers have judgments and administration orders against them.


So why do consumers keep adding to their debt?

According to Dr Azar Jammine, chief economist at Econometrix, credit providers lure consumers into taking credit.

“Credit providers try and entice people who are not able to buy things to do so,” he says, adding that many South Africans feel pressured to ‘keep up with the Joneses’.  

“In South Africa, there are advertisements for expenditure on all sorts of items such as durable goods and electronics. A large amount is being spent on cellphones and data, which was previously not an expenditure item in people’s lives. Somehow this is treated as a priority in people’s lives, even though they realise they can’t afford it,” says Jammine.

He adds that many find themselves in debt because they lack financial education.

“Unfortunately, many in South Africa are [financially] illiterate. They are enticed into these things because they think it is a way of uplifting their wellbeing – and they are not fully aware of the consequences because they are not spelled out to them.”

 Stagnant economy

The slow economy is also contributing to consumer appetite for debt, says Jammine.

“The main problem is that the economy is not growing rapidly. People are becoming unemployed and are under a lot of pressure, yet they are trying to sustain their living standards, and they must borrow money to sustain those living standards.”

He says an over-indebted country eventually harms its economy.

“The consequence of indebted citizens on the economy is that eventually you have less buying power in the economy, and ultimately that results in declining economic growth generally.”

In short, you don’t get the economic recovery you need to return to the levels that existed before the downturn.

Failure-to-launch syndrome

A 2019 financial reality survey by DebtSafe indicated that many of the 1 020 participants were indebted due to:

  • Tough economic times, so they can’t afford basic necessities (67%)
  • Education and school expenses for themselves, children and other relatives (38%)
  • Unforeseen circumstances (29%)

DebtSafe debt advisor Carla Oberholzer says 70% of the participants were females from metro cities, aged between 25 and 27.

“Most were single parents affected by the ‘failure to launch’ syndrome,” she says, explaining that they live with their parents and must look after their parents or grandparents as well, instead of focusing on their own responsibilities.

Oberholzer says the other big worries for the respondents is their income not keeping up with inflation, and not being able to save.

Stress, rage, anxiety

She says many of her clients find themselves stressed as a result of living above their means.

“What we have noticed with our clients is that they have rage and anxiety,” says Oberholzer.

She advises over-indebted consumers to start paying off their largest debt first. “It is very important that they clear their debt bit by bit, starting with the credit card with the highest instalment.

“Consumers also need to realise that paying off all their debt is not going to happen in one or two months. They need to be realistic.”

Read: Banks worried over new SA law giving clients debt relief

Close to 9.4m consumers may qualify for debt relief under new bill – listen to Moneyweb Editor Ryk van Niekerk’s August 19 interview with Cas Coovadia of the Banking Association of SA on the SAfm Market Update with Moneyweb (or read the transcript here):



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“Most were single parents”. Case closed.

Single mothers. No need to be politically correct.

My children are in high school. The subject life orientation is compulsory yet it seems to teach stress management and no bullying.

Why aren’t we teaching our kids the basics at school.
1. How to budget
2. Debt and the cost of it
3. How to open a bank account
4. Read a contract
5. Look after a child

The subject is still mostly useless . We called it career guidance when I was at school

Why don’t you teach your children those things because you are aware of this gap? Don’t wait for someone do that for you.

That is your job. Stop outsourcing your job to some teacher.

When we trained the Central Bank of Lesotho, the Reserve Bank Governor told me that (in Lesotho) they are now going to put financial education in the schools. I really was a happy person when I heard that.
Financial Fitness is the answer.23 years later helping South Africans solve this problem!!

Truly speaking I don’t think it is about financial fitness… Our great great grand parents, those who knew the light managed their wealth, no matter how meagre, with such care. People have to be taught discipline more than anything… Restraint will develop you as an individual… I can’t get it, that someone works for 30 days for a salary, however small it is, only to lose it all in a few hours to creditors… I still can’t get it that my helper at home has the latest i-phone from Edgars while I can’t afford it. My single parent sister with two kids has a full bouquet pay TV subscription while I have compact. … My take is business should be stopped from selling certain products to certain people… Business is contributing to this. We need laws that will not allow business to recover bad debt from anyone they extended credit to, they took the risk they must live with it.

On a more philosophical level, peasants worked as serfs for the landowner during the Middle Ages, in what is known as the feudal system. Land was exchanged for work in this system. This system was abandoned, and people won their freedom.

Now, individuals voluntarily go back to the feudal system when some exchange work for land when they apply for a bond to buy a house. Others simply enslave themselves to the owners of capital in exchange for cash. The banker is only the intermediary, the debt-collector, between the “landowner”(owner of capital) and the vassal. People enslave themselves willingly this time around. They apply to be enslaved and when their request for enslavement is granted, they rejoice and show gratitude.

The problem only arises when this vassal cannot manage to work enough to settle his part of the deal. When there are not enough hours in a day. Then, the “landowner” cancels the deal, takes back whatever he can, and set the slave free once again.

Let’s reflect for a moment on who the actual providers of the debt are. For the borrower to enslave himself, there must be a lender who does the enslaving. Who are the “slave-traders” in this economy?

What is the origin of bank loans? It is cash deposits, time deposits, bond purchases, or savings in general. Therefore, every individual who owns a pension fund, who owns savings in some form or another, or a person who gave his house to the bank as security, is the originator of the loan. It is your money that is being lent out to people who enslave themselves.

If these debts are written off, in effect, it is your capital that will become a charitable donation to the person who receives the reprieve. This idea from the government to write off the debts of some people is very philanthropic at first glance. Until we realise that this venture to buy votes actually is the expropriation without compensation of our personal savings! The government, like all socialists, is being philanthropic with our money!

This proves that sympathy is a relative concept.

So that is why my bank balance went down right!

People live above their means. But where does it come from?

Yes, we’ve heard people utter “cost of living in SA is fairly expensive” (compared to a few other 3rd world countries on the Numbeo-site)

By WHY is that??

SA has a high annual % increase in “administered prices” coming from municipal (a large % ANC controlled) and national govt (to prop up SOEs). This makes our municipal rates & national Income Tax high….and that cost is passed along in the cost of production to the SA consumer.

That leads to inefficiencies.

SA has import tariffs that protects inefficient labour. Then what is wrong with Labour?

Same stories in large private companies…there are certain rules that makes Labour costs high…you are forced to employ along certain rules.

What could that be??

(THAT MUST BE the economic COST of SA’s unsustainable social experiment, courtesy from our pro-socialist/populist regime)

Life is SA is expensive as a result of a CONSEQUENCE of past policy decisions. Where’s the improved education system we’ve been hoping for since 94? Most common SA catch-phrase is “I don’t know”

We have a financial system that is fueled by debt; It is designed for as many citizens as possible to be enslaved to debt, working from pay cheque to pay cheque so the blinkers remain in place preventing them from seeing the big picture.

It started with going off the gold standard in the 70’s; central banks could now print as much paper money as they liked because it was no longer backed by a limited resource.

Then came fractional reserve banking whereby banksters could create money out of thin air by retaining only a minuscule portion of deposits as backing for loans. So, by way of example, if I deposit R100 in my bank account, the bank can now lend, say, R1000. I receive a pittance on my R100, say R5 whereas the poor soul who borrowed has to pay back R1000 plus interest of say R100. Thus the bankster makes a profit of R995 on a R100 deposit.

This is what gives the government, central banks and banksters power & control over its citizens, enslaving them to a life of hard labour.

This criminal system will eventually break as more & more people awaken to cryptocurrencies which is money created by the people for the people and strips the power from money and disburses it to the people.

Please people, know this: It is NOT your fault you are in debt; your are in debt by design. Seek help in getting out of debt and then leave this beast forever in your past.

Well stated. 2 points come to mind.
The banks, through their representative, the Central Bank, and their representative, the IMF, won’t sit back and let cryptocurrencies infringe on their monopoly to issue currencies. They will regulate crypto in a process to “protect you from yourself”.

The second point – banking is a wonderful business-model because you have a license from government to create the raw materials for your production process out of thin air. Each and every investor and owner of a pension fund owns shares in the banks. If these investors buy crypto, then they are basically in competition with themselves.

Well, if you lot weren’t so stupid about crypto, you wouldn’t have to be regulated.

Fractional reserve banking doesn’t work quite like that !

Assuming a 10% reserve ratio : from the deposit of 100, 10 is held in reserve assets and a maximum of 90 can be lent out. Until that loan comes back into the bank(ing system) that is the end of the story.

If the 90 comes in as a (fresh) deposit, 9 of it is reserved and 81 can be lent out.

Repeat that indefinitely and you end up with deposits of 900, reserve assets of 90 and loans of 810.

So in a sense the initial deposit of 100 has given rise to loans of 810 but only because there have been a lot more deposits along the way, which is conveniently forgotten. The bank’s margin will obviously depend on the rates specific to those deposits and loans, but 40 is about the mark.

If what comes into the bank is not fresh deposits but loan repayments, the multiplier effect is reduced.

Another YouTube viewer makes a big revelation about fractional banking and thinks he has found some big secret.

No knowledge is dangerous, but a little is even worse. You have been mislead.

brilliant response that is why I suggest if you’re over-indebted do debt review and clear up your debts

high interest rates are a big contributing factor?

There are a couple of issues here.
1. The greed factor. Not living according to one’s ability to pay for the goods one buys. 10th Commandment coveting is the original stumbling block.
2. Largely the media are the underlying culprits. “Marketing is the sly art of enticing the consumer to want and buy goods they don’t need with money they don’t have to impress someone they don’t like.”
3. Banks and moneylenders. They facilitate point 2 with even greater greed. Interest rates of 21.5% and probably higher. Debt trap? Who puts the cheese in there and who sets the spring? 8th and 10th Commandments.

Some years ago the BBC produced a series of commentaries on various aspects of the Western economic processes. I saw the first. Based on the iniquitous assumptions of Freud’s psychoanalysis, his nephew developed a new economic creed and convinced the great corporates to change the citizen into a consumer. The rest is history as they say. And credit was the underlying factor. Entrap the citizen by convincing him he is entitled to anything and everything he wants. The American dream? More like nightmare.
And the world is drowning in debt. Japan=235% of GDP. Interestingly Hong Kong is in practice debt free.

I like your point 2.
Japan has very high debt, but I guess they pay lower percentage of their budget to service this debt than SA because their interest rate is very low.

Agree, The Hun…you’re spot-on.
Japan’s negative interest rates make the size of debt less relevant. (The USA survives a 106% debt to GDP-ratio, as they benefit in controlling the world’s reserve currency.) In Japan one invest say 1,000 JPY and at end of deposit term, you receive say 999 JPY.

The same applies to debt….you end up paying LESS back to finance-house.

Was done to stimulate the economy since 2016, mostly to fend off an unwelcome yen appreciation from hurting an export-reliant economy.

Yes freuds nephew. Lol. Secret family wisdom. Double nephew. Makes for a cool hit and run fact but means nothing… unless you are trying to sensationalise.

Two contributors to overextension :

Affordability assessments just aren’t done properly. I was given a form by my bank setting out my expenditure under various headings. More than half didn’t fit into any of those categories. Lumpy costs (holidays, Christmas etc) usually aren’t mentioned. Never mind support to extended family, funeral costs, whatever. How many people actually know in detail what they spend ? How many fill in the form with thumbsucks prompted by a sales clerk, adjusted to make the loan viable ? So no wonder people never recover from unexpected expenditure.

Enticement to borrow is often indirect. Take, your credit rating free, for life. But it’s the commission on maxing out your facilities through their app that pays for all those TV ads.

Which leads me to this : Zweli and Cyril watching TV :

Z : I’m thing of getting a new National Health system
C : Can we afford a new National Health system ?
Z : Don’t know
C : Can we get a good deal on a loan ?
Z : Don’t know
C : Well what’s our credit score ?
[From the TV] Better score, better deals ! Yeah, Moose !

Even the dog gets it. Maybe Moodys should do TV adverts.

LOL maybe moody’s should do TV ads instead of ratings

Is there an echo in the room?

“Unfortunately, many in South Africa are [financially] illiterate. They are enticed into these things because they think it is a way of uplifting their wellbeing – and they are not fully aware of the consequences because they are not spelled out to them.”

Well well well. That’s a big surprise, I think I’m gonna roll over and die from not surprise.

Guess what britches? these folks also choose the government. Now suddenly everything’s crystal, everything’s clear.

it all based upon consumption we live in a socialist society.

It’s the system, the system is flawed.

Wow, great comment. Such indight and analysis.

Likewise to you!

“Anything about Nothing”

Where is YOUR substantive proof in the drivel that you utter???

Anything but brains can only sprout drivel. He must be the guy in Sidney’s backward cousin.

*shakes fist at cloud*

Lol, you guys get upset hey. “The system is flawed!” Well thanks for the insight!


Well then! 🙂 We’re happy we obliged by providing you with the desired attention that you sought!

We hope to hear a lot about you going forward.

All fools keep calm & proceed with Brexit! *lol* (Sorry, I’ve lost the plot this morning!)

So the country has 25m active credit consumers. And 5m taxpayers. Just saying.

Wrong. They all pay taxes in the form of VAT etc etc.

Don’t confuse income tax with tax. I know it helps the victimhood agenda – but it simply isn’t true.

Don’t confuse the vat paid by grant recipients with income to the state.

@”Confused at ANYTHING”

Don’t be confused. The correct way in classifying Tapes of Tax is split between DIRECT & INDIRECT tax!

“Income Tax” is a DIRECT tax (applicable to Individuals & Corporations). CGT, Dividend tax, Estate Duty also falls under DIRECT Tax.

Under INDIRECT tax you’ll find VAT (…I see you already recognize it 😉 , and Customs & Excise Duties, Transfer Duty (uhm…that’s on your property)

Want substantive proof?? Well, you have the whole SARS website to yourself. You can also order from Hedron Tax Consulting the annual “Notes on South African Income Tax” edition & see for yourself.(Tax is a global conspiracy, did you know? Bhoo-hoo…)

End of comments.



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