South Africa's growing debt crisis

Rhoda Southgate

24 June 2003

The Reserve Bank puts household debt at 51% of household income, while over
five months in the last year, more than 130 000 summonses for unpaid debt
were issued. A recent study has found that this is costing the economy about
R500 million per month, with 3 000 individuals facing debts judgements each
month.

This problem is most evident among low and middle-income earners where
increases in the costs of education, medical and household costs have
outstripped the rise in salaries over the past five years.

Almost half of those facing debt judgements find themselves in trouble for
failing to repay money lent to them by microlenders. Furniture,
municipalities and other accounts are also adding to the stress.

State entities are contributing by undermining inflation targets. Some
parastatals, Eskom for example, charge tariffs in excess of inflation, while
paying employees on average double the national average wage.

The ACDP calls for a limit on garnishee orders where money is taken off
employee' pay cheques to settle debt, preventing people from falling into a
never-ending spiral of debt, which can lead to social instability and fraud.

We urge the government to offer incentives to employers to educate staff in
financial matters and expand state education and training facilities
offering financial education programmes.

It is unacceptable that retail creditors ignore a buyer's credit record and
strict credit limits must be imposed to prevent large amounts of credit
being offered to those who do not have the means to repay it. Lending laws
must be adhered to and we advise that retailers offering credit must explain
fully to the buyer the implications of repayments.



For more information: Rhoda Southgate MP at 082 875 8194
Media Liaison: Charmaine Horne at 084 370 3550 or 021 403 3307