South Africa’s middle class is buckling under debt

Consumers face extreme financial pressure

The South African middle class is unable to meet its debt obligations on time, with 70 percent of respondents admitting to being ‘financially stressed’.

The Sanlam Benchmark Survey has found that the South African middle classes are buckling under financial pressure, with short-term debts such as credit cards, car repayments and personal loans proving the most difficult to repay.

50 percent are in ‘junk status’

With 50 percent of respondents admitting to being unable to meet their debt obligations consistently throughout the year, the CEO of the credit rating firm that commissioned the survey said they would be a given rating of ‘junk status’. That would match the credit rating of the country which has been downgraded. That makes it more expensive for South Africa to borrow money from international markets, making it even more difficult to escape its current economic black hole.

More worrying still is the fact that the survey sampled more than 1,300 people, 60 percent of which earn more than R300 000 a year. Their inability to service their debts is not only impacting on their quality of life, but is also having an impact on productivity in the workplace, with many employees too stressed to be effective at work.

South Africans use credit cards to eat

With the middle classes struggling to maintain their lifestyle, another survey found that the working classes are struggling simply to eat. With the weak rand causing food prices to rise, an increasing number of consumers are resorting to credit cards and borrowing money from lenders like Wonga SA simply to get by.

The cost of the average monthly food basket rose by a staggering 23.8 percent from April 2015-2016, leaving the poorest 40-50 percent of the population struggling to eat. Food inflation for the first three-quarters of 2017 has averaged 10.75 percent, showing that there’s no sign of food prices falling anytime soon.

Can employers help?

So how can South African consumers, and the middle class specifically, hope to escape this spiralling debt? Some say it should be down to employers to help debt-laden employees. With financial stresses impacting productivity in the workplace, experts argue that employers should help to improve the financial wellness of their employees not only because it’s the right thing to do, but also because it makes good business sense.

For now, people are borrowing money from family and friends and using short-term credit facilities to make ends meet, which is clearly not sustainable. Many are even planning to reduce their standard of living when it comes to their retirement to help them get by. And, with high unemployment, contracting economic growth and rising household debt across the board, financial wellness rates do not look like they’ll be improving anytime soon.

Are you struggling with high levels of household debt? What sacrifices are you making to get by? Please share your thoughts in the comments below.

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