This quarterly report highlights the impact of economic forces on the South African consumer, with particular focus on consumer credit behaviour.
The number of retail accounts grew by 156,000 – the first QoQ growth in a year. This coincided with the first increase in retail sales (2.3% in February) since before the hard Lockdown. The biggest drivers of this growth were household furniture, appliances and equipment. The biggest losers were pharmaceuticals, cosmetics, and toiletries.
The overdue balance did not grow at the same rate we say last quarter, but the current balance on loans increased by R4.5bn (half what it was last quarter). The number of loans in good standing is down 7% on last year while the proportion of mostly unrecoverable loans (9+ months in arrears) continued to increase.
This quarter saw a continued increase in the proportion of defaulters across all income brackets, but there was particular trauma with the wealthy. There was a 4% increase in the number of credit active consumers earning more than R60 000 per month, but their default proportion also increased – by 8% QoQ. Vehicle Finance suffered in particular, with nearly 1 in 3 people in this segment who are in default are delinquent on a car loan. Further, of those earning more than R60,000 per month, 1 in 3 defaulters are defaulting on a VAF.
For home loans between R1m and R3m, Q4 saw a significant increase in the number of loans taken out by those under 35, where the number of loans increased by 29% YoY and the purchasing trend of this age group seeming unaffected by Covid-19. All other age groups showed a decrease in the number of new home loans taken out, despite a general upward trend over the course of the last four years.
“One of the biggest takeaways is the bleak outlook for the credit worthiness of the youth of this country. A credit score might not seem important when you are 22, but could come back to haunt you later when you want to purchase a car or house. If the current growth in defaulters continues, in six years 100% of the credit active individuals between 18-24 could be in default. Considering that the unemployment rate hit yet another high of 32.6% in Q1, and 63.3% for youth,” says Andrew Fulton, Director at Eighty20.
One ray of hope for 2021 is that the vaccine roll out has commenced in earnest in South Africa, and the positivity coming from North America, where millions have been vaccinated, indicates vaccines will allow the country to start its economic recovery in earnest as well.