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South African's unaware of the state of their credit profiles

14 April 2015 Wikus Oliver, DebtSafe

The recent amendments in the National Credit Act (NCA) will make it more difficult for consumers to turn to unsecured lenders when short on cash. With stricter structures for affordability assessments by lenders being put in place, it has never been more important for South Africans to maintain a good credit standing – however, a worrying amount of South Africans are currently unaware of the state of their own personal credit profile.

DebtSafe recently carried out its ‘Facing your debt head-on’ survey, which garnered responses from more than two thousand individuals. The survey, which was held in an effort to gain a better understanding of consumers’ financial experiences, revealed interesting and somewhat unsettling insights. “One finding stood out in particular, which is a cause for serious concern,” says Wikus Oliver, debt management expert at DebtSafe. “Just under half of respondents indicated that they are not aware of the state of their credit profile – with 9% having no idea what a credit profile is it all.”

In addition, about a third of respondents stated that they do not know how much debt they have in total against their name. “These results highlight the significant need for debt education among South Africans,” says Olivier. “In order to fully understand your financial position and move forward, it is absolutely crucial to have a thorough knowledge of how much debt you owe. Keeping track of your current credit status will encourage you to be more responsible about the debt you incur.”

Other findings garnered from the survey show that more than half of respondents do not have a savings plan in place, while 38% have no savings at all. “A small amount of planning and saving can go a long way, from assisting with planned purchases to preparedness for unexpected costs, but unfortunately a massive 67% of respondents do not have an emergency savings fund in place.” Olivier explains that a dangerous consequence of this is that cash strapped consumers often turn to other means of acquiring money when unforeseen expenses arise, taking out either unsecured loans or further exhausting their credit facilities, which can further entrench them in the negative cycle of indebtedness. This is impounded by the often extremely high interest rates attached to unsecured loans, which contributes significantly to the difficulty of meeting the subsequent repayment obligations.

“Again, this concerning finding highlights the need for the advocating of a savings culture in South Africa, as part of an overall basic financial education,” says Olivier. “There are a number of educational and practical tools available to the public to assist with finance management, such as the DebtSafe Financial Calculator, and the free DebtSafe Budget Template. We urge individuals to make use of these types of resources.”

“There is an undeniable issue of over-indebtedness in South Africa,” says Olivier. “57.8% of the population categorised as delinquent in their debt payment behaviour, which can have serious consequences on an individual’s financial wellbeing and access to financial resources,” says Olivier.
The findings from this survey have highlighted the importance of not only spending responsibly and saving, but also the absolute necessity of maintaining a good credit standing.

“Considering the stricter structures now in place through the NCA amendments, borrowing cash will become more difficult for consumers, but keeping up with your payments - which just under half of respondents claim to do - will act in your favour,” concludes Olivier.

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The South African authorities are hard at work to ensure the country is removed from the global Financial Action Task Force grey-list by February or June 2025. What do you think about their ongoing efforts?

ANSWER

But what about the BRICS?
Compliance burden remains, grey-list or not.
End-2025 exit is too optimistic.
Grey-list is the new normal.
Too little, too late.
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