{"id":169548,"date":"2020-10-21T15:05:46","date_gmt":"2020-10-21T13:05:46","guid":{"rendered":"https:\/\/mypr.co.za\/?p=95311"},"modified":"2020-10-21T15:05:46","modified_gmt":"2020-10-21T13:05:46","slug":"how-south-african-debtors-have-coped-with-lockdown","status":"publish","type":"post","link":"https:\/\/www.myza.co.za\/press\/how-south-african-debtors-have-coped-with-lockdown\/","title":{"rendered":"How South African debtors have coped with lockdown"},"content":{"rendered":"
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With South Africa\u2019s state of disaster coming up for review again this week, Eighty20\u2019s Credit Stress Report for Q2 2020 \u2013 compiled in collaboration with XDS \u2013 offers some insight into how South Africans have managed their debt in light of the economic impact of lockdown during Q2 2020.<\/p>\n

Quarter Two (Q2) was a depressing quarter in South Africa, with GDP contracting 16% Quarter on Quarter (QoQ) and at least 2.2m jobs shed from the labour force. The Consumer Confidence Index hit its lowest level in 35 years. The 14% reduction in the fuel price,150bps reduction in repo rate to 3.75% and the promised R500 billion in relief did little to ease the severe strain that Lockdown put on the economy and consumers.
This quarter saw a 3.6% decrease in the number of loans in the market (from R54.1 million to R52.1 million). This movement has been driven largely by a 20% reduction in new loans granted (480,000 in Q2). Of the new loans granted, 96% was unsecured.<\/p>\n

The Retail Picture<\/strong><\/p>\n

By far the largest debt category in terms of number of loans is retail credit (nearly half of all loan products are retail credit). The lockdown put an end to a five-year positive trend in retail sales, with a 60% reduction in the number of new retail accounts opened compared to the previous quarter. It was impossible to make payments in store or sign up for new cards at most retailers, which resulted in 140,000 fewer loans taken out during lockdown. The overdue balance on retail accounts increased by R1.5 billion.<\/p>\n

\u201cWhile retail sales did recover substantially in May, we\u2019ve seen a decrease again in July which suggests we haven\u2019t seen the worst yet,\u201d says Andrew Fulton, Director at Eighty20. In South Africa, 7 out of 10 economically active women have at least one retail account. Given this strong gender bias in retail credit holdings and the poorer experience of these types of loans, we see that at an overall level men and women have markedly different credit profiles. This is especially true in some age groups, with almost 70% of defaulters in their 20s being women.<\/p>\n

In comparison, asset finance repayments are more of a priority for South Africans. \u201cPeople often stop making payments on their store and furniture accounts until they need more credit, whereas they don\u2019t want to lose their house or car so naturally these payments would be made first,\u201d Fulton explains. Accordingly, the increase in arrears on mortgages was low this quarter but vehicle asset finance saw a 24% increase in overdue balances year on year, which is concerning.<\/p>\n

The number of loans in arrears increased by 300,000 \u2013 a 1.4% increase QoQ. Notably, accounts 3-6 months in arrears increased by 12%. Despite little change in the number of loans compared to this time last year, the overdue amount has increased by almost R17 billion, which is about 10% of all overdue debt. The overdue balance currently makes up 9% of the roughly R2 trillion in current balances, which is up by a percentage point from last quarter.<\/p>\n

Consumers new to Credit Stress<\/strong><\/p>\n

As expected, the level five lockdown impacted consumers on both financial and confidence fronts. Those who remained employed with salaries unaffected may have curbed spending and deleveraged their positions. This is evidenced in the decrease in overall outstanding balances. Also impacting these levels were lenders increased conservative risk appetites due to the prevailing economic uncertainty. A resultant impact of the lockdown was an increase in the number of individuals going into arrears for the first time in particular industries, most notably secured lending. \u201cThe true level of distress will likely manifest in the coming months as payment holidays run their course. \u201c says Ryan Smith from XDS<\/p>\n

Recovery may be some way off<\/strong><\/p>\n

The good news for vehicle financiers and retailers is that, by the end of Q2, retail store accounts and vehicle finance were almost back at pre-COVID levels. There was also a 24% increase in the number of people settling their debts early when compared with this quarter last year.<\/p>\n

\u201cAnecdotally, there are some reports that banks are giving bonds more easily and we are hearing that the second-hand car market has increased significantly.\u201d Fulton says.<\/p>\n

He remains cautious, however. \u201cIt will be interesting to see what the Q3 report shows, as more successful loan applications don\u2019t necessarily mean people will be able to continue making payments if they lose their jobs. We know that the economy shed 2.2 million jobs in the past quarter, so banks and retailers will probably remain more cautious for some time.\u201d<\/p>\n

\u201cThere are about 1.7 million fewer loans in good standing,\u201d Fulton points out, \u201cand the number of consumers in good standing have decreased by about half a million. So, while lockdown regulations have eased dramatically and, judging by activity in public, it may seem as if we\u2019re getting back to business as usual, longer-term impacts will still be showing themselves over the next two quarters and probably well into 2021.\u201d<\/p>\n

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Source: MyPR.co.za<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

With South Africa\u2019s state of disaster coming up for review again this week, Eighty20\u2019s Credit Stress Report for Q2 2020 \u2013 compiled in collaboration with XDS \u2013 offers some insight into how South Africans have managed their debt in light of the economic impact of lockdown during Q2 2020. Quarter Two (Q2) was a depressing […]<\/p>\n","protected":false},"author":1,"featured_media":169549,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","ngg_post_thumbnail":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[9021,1],"tags":[3257],"class_list":{"0":"post-169548","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-mypr","8":"category-south-africa","9":"tag-mypr","10":"entry"},"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/www.myza.co.za\/press\/wp-content\/uploads\/2020\/10\/how-south-african-debtors-have-coped-with-lockdown.jpg","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/posts\/169548","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/comments?post=169548"}],"version-history":[{"count":0,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/posts\/169548\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/media\/169549"}],"wp:attachment":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/media?parent=169548"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/categories?post=169548"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/tags?post=169548"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}