Credit active consumers remain under strain - Experian Report

The Experian Consumer Default Index (CDIx) for Q4 of 2023, has revealed a deterioration from 3.97 to 4.68 – a relative change of 18%.

The CDIx, which measures the rolling default behaviour of South African consumers with Home Loans, Vehicle Loan, Personal Loan, Credit Card and Retail Loan accounts, also highlights that all product-specific CDIx metrics changed for the worse year-on-year, with Home Loans and Credit Cards showing the most significant deterioration. This suggests that mid-to-high affluence consumers, who typically qualify for these high-end credit products, are finding it increasingly difficult to repay debt and continue to make extensive use of their credit cards.

Furthermore, the report reveals that the higher-affluence consumer groups have been under increasing pressure to honour their debt commitments, leading to a surge in Debt Review applications. This indicates a growing demand for financial counselling and debt management services.

“These findings have significant implications for financial institutions operating in South Africa. With an increased risk of defaults, particularly in home loans and credit cards, banks and other lenders may need to reassess their risk management strategies and lending criteria,” says Jaco van Jaarsveldt, Experian’s Head of Commercial Strategy and Innovation.

CPI remains under 6% threshold
The Consumer Price Inflation (CPI) has remained within the South African Reserve Bank (SARB)’s target band of 3% - 6%, since June 2023 following the 13 preceding months where the CPI exceeded this target band. During this period, CPI reached a peak of 7.8% in July 2022. The December 2023 decrease in the CPI coincided with a drop in food inflation, which was good news for the cash-strapped South African consumer base.

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