The economic fallout of the coronavirus will be devastating for many SA consumers already reeling under huge debts they have already accumulated from credit providers, according to findings from credit bureau data for the three months ending December.

The banks have already moved to manage the fallout of the economic losses created as a result of the lockdown. Standard Bank was the first to announce relief for customers, with students receiving a three-month payment holiday on student loans at a zero interest rate and low-income earners and small and medium-sized enterprises being given a three-month instalment holiday from April 1.  

But the outstanding loan balances have built up progressively in recent quarters, with a noticeable upward trajectory since the first quarter of 2019, said Carmen Williams, director of research and consulting for TransUnion SA, one of the country’s largest credit bureaus. “With the exception of bank personal loans, all other major consumer lending categories recorded year-on-year increases in serious delinquency rates,” she said.

Williams said the pressure is being felt across the board. Consumers with a low risk profile, which constitutes many upper- and middle-income earners, are feeling the pinch, as can be seen by the increase in delinquencies in home loans, vehicle and asset finance, and credit cards.

“The vehicle and asset finance delinquency rate hit 6.9% in December, a figure that has more than doubled in the last three years,” said Williams.

Industry dynamics are also coming into play. “There are concerns around consumers meeting balloon repayments at the end of the instalment period. You can also see the stress as payment terms for cars extend in some cases to 84 and 96 months,” said Williams.

This all comes at a time when the economy languished in recession for the last two quarters of 2019, with the situation set to worsen.

“We observed a downward trend in the leading economic indicators, which looked set to continue before Covid-19. The number of people who hold credit-linked retail accounts was flat in the fourth quarter, which shows you how flat the economy is — it usually jumps as people begin buying before Christmas,”said Andrew Fulton, the CEO of Eighty20, a research and data analytics firm that focuses on consumer trends.

Eighty20 analysed data from the XDS Credit Bureau, which showed the biggest increase in defaults in percentage terms was by individuals earning R20,000-R59,000 a month. The number of accounts in default rose from 17.3% to 18% during the quarter.

“There is a perception that all of this trauma is occurring at the lower end of the market. But we are seeing that it’s the middle class and upper-middle class that is battling to live their lives at the same standard they enjoyed just a year before. So it’s not just the lower classes feeling the pain,” said Fulton.