Unbelievable – is this a disaster in the making?

Unbelievable – is this a disaster in the making?

A total of 10.75 million consumers are in arrears, according to the Credit Bureau Monitor for the fourth quarter of 2009 – an increase of 160,000 from the previous quarter.

I read this yesterday and it seemed too bad to be true so I did some investigating and found the actual report http://www.ncr.org.za/publications/Credit_Monitor/CB%20Monitor%20-%20December%202009%20Q.pdf .It is worth reading but is somewhat depressing…a few things stand out for me. There are a total of 18.07million credit active consumers on the credit bureau’s databases in SA and of these, only 40.5% (7.3million) are up to date with their credit payments (see pie chart below). Almost 60% of credit is at least 1 month in arrears.


The table below summarises the situation in SA very nicely…


Picture2I am sure that there will be people somewhere who will be able to put a positive spin on this but we also need to remember about all the adminstered price increases that are coming into effect as well – electricity, rates, fuel, water – to name 4 and there is no doubt in my mind that things are not looking rosy for consumers and already (financially) stressed households.

So from a financial planning side, the old adage remains true – get out of debt before you invest!  Things might be manageable while interest rates are low but they are not going to stay low forever so use this opportunity to get rid of your debts and then make it a priority to stay out of debt.