More than R2.5 trillion in outstanding personal debt can be deployed to ‘kick-start’ local economy

Published Jun 23, 2024


More than R2.5 trillion in outstanding personal debt owed by South Africans can be released to the local economy, according to the National Debt Counsellors’ Association (NDCA).

According to the organisation, which represents some of the debt counsellors operating in South Africa, around R70-R100 billion of this outstanding debt belonged to consumers who were in debt counselling, with an estimated R15bn currently being paid back annually.

NDCA chairperson Benay Sager said: “South Africa has a world-class debt-counselling system, which has been proven to work. It’s conceivable that if more people sought help to manage their debt, the R15bn being returned to the economy annually could be increased to R25bn,” Sager said.

The association estimates that there were around 250 000 consumers who were in debt counselling and were actively paying back their creditors every month. Collectively, they were estimated to pay around R1.25bn per month to creditors.

Part of this includes regular repayments on 20 000 homes and 60 000 vehicles. While this debt remained with the original lenders, NDCA said it was still an asset which they wanted to recover, even when restructured as part of the debt-counselling process.

Sager said that because debt counsellors helped manage the repayment of these assets, and it was time to think about the sector as an arm of the asset management industry, albeit one that was managing some of the distressed assets.

“Rather than being dormant while lenders try to recover it, the annual R15bn being repaid to creditors is put to good use by lenders to help grow the economy. This money is lent many times over, and if it increased by a further R10bn per annum, then more money would be available to kick-start the growth of the economy.

“At the same time, while in debt counselling, assets such as houses and cars are protected, so consumers don’t endure the pain and humiliation of having these repossessed. It’s a win-win.”

The organisation said another advantage of encouraging more financially-constrained consumers to seek help to manage debt was that high-interest debt was repaid first. This potentially freed up some income to address another issue with which too many South African consumers struggle, that is, savings savings.

“Debt counselling has an arguably important role in these straitened times, an increasingly critical role to play by restructuring debt to get more money circulating in the economy,” Sager said.

NDCA said besides realising debt counselling’s opportunity to do this in the current regulatory environment, there was a potential to extend it to other forms of debt. Currently debt counsellors cannot restructure levies, municipal rates, and school fees, all of which fall outside of the National Credit Act (NCA).

Sager said he hopes that potential future amendments to the NCA would allow debt counsellors to restructure these kinds of debt so that much-needed money owed to struggling schools and municipalities could also be recovered.

“Debt counselling is too often considered only a means to help consumers restructure their debt and get back on their feet. What is often overlooked is that it enables lenders to recover what they are owed. With personal debt at or near record levels and a stagnant economy, a functioning, efficient debt counselling sector is good for consumers and good for the country,” he said.

Meanwhile, according to the Food Basket Price Monthly June 2024, published by the National Agricultural Marketing Council (Namc) during May 2024, the nominal cost of the NAMC’s 28-item urban food basket amounted to R1 273.02 compared to the R1 263.47 reported in April 2024. This represents a monthly increase of 0.8% and a year-on-year increase of 7.6%.

In this publication, Namc said South Africa's food inflation is expected to fluctuate in the coming months, largely due to global increases in price indices for key commodities such as cereal and dairy.

“These increases are currently slightly offset by decreases in indices for items like vegetable oils and sugar. According to the FAO (2024), the increase in food prices is mainly driven by the damage to Black Sea infrastructure, import demands for dairy products from North American countries, and conducive weather conditions in Brazil.

“Conversely, maize prices increased in May, primarily influenced by crop damage from the spread of Spiroplasma disease in Argentina and unfavourable weather conditions in Brazil. Additionally, the spillover effects of wheat markets have affected maize prices. It is important to note that global soy oil prices are increasing, driven by demand in the biofuel sector, particularly in Brazil. These food challenges indirectly and directly influence the current state of South African food prices,” it said.