Household Debt in South Africa

Both the Finance Minister and the Reserve Bank governor worry about the unprecedented high in household debt ratio and the rise in consumer credit debt.  But when you compare the household debt in South Africa to the debt in other countries like Australia and the US, the problems seem to be put into perspective. 

Annual credit growth is 40% to 50% in many European countries whereas South Africa’s credit growth was only around 23% recently.  Part of the positive in South Africa’s debt situation is that households are now spending more of their income on servicing their debt than they did a couple of years ago.  Though this figure is still low, it shows a positive trend.

 Another positive is the growing of the middle class in South Africa.  Combine this middle class with rising incomes, declining interest rates, and debt spread out among more of the population, and it seems South Africa is moving into a better place financially.  There has been however, much debate about the rise in debt levels across many countries over the past 20 years—but from where SA is now, it will take more research into the spread of debt across households before we can determine if this increased in debt should be considered a negative. ■