A new report shows that South African fathers, who are in debt are seeking help sooner rather than later. As the country marks Fathers’ Day this weekend, many families are facing financial distress as a result of COVID-19.
Data from a leading debt counsellor suggests that while things are difficult, there is a positive shift in sentiment when it comes to Dads seeking help.
DebtBusters’ debt index for the first quarter of 2020 shows South African households were struggling to pay their debt even before the COVID-19 lockdown.
Borrowing has increased substantially in the first quarter and so did debt levels. Total debt levels increased to 33% on average compared to the same period in 2016. Debt for top earners increased by 63% compared to the first quarter of 2016.
“The total debt levels are escalating and income levels are not increasing. These numbers are all before the lockdown happened, so pre-C so the numbers you’re looking at is first quarter those who applied to us. And it just shows an escalation in terms of the debt levels particularly alarming is the amount of unsecured debt level increase and that is things like credit and retail accounts. But we compared the debt levels to the income levels and what we are seeing is a deterioration even for consumers who are seeking debt counselling and so it would be interesting to see what the lockdown figures look like when we speak again,” says DebtBusters Chief Operating Officer, Benay Sager.
The data shows that many more consumers need help with managing debt.
“What we have seen as DebtBusters is that about 80% increase compared to the same period last year in terms of the inquiry consumers are making about the solution. 80% more people are interested and potentially taking this solution. And many of them are evaluating their solutions in regards to payment holidays from the banks and actually waiting to see if they will have a job to go back to,” adds Sager.
Segar says people in debt wait too long before getting help, hoping the problem will sort itself out. He hopes there will be a more comprehensive debt package after the COVID-19 outbreak to assist consumers with debt relief.
“There are about 2000 people who are actively in debt counselling and we think from where we sit there should be millions of people seeking this help. The thing about debt counselling is that it’s provided for by the National Credit Act. And it’s a fantastic way for the consumer to get back on their feet. Unfortunately, the lockdown and the COVID- 19 had a very devastating effect on many parts of the economy and lenders have tried to provide relief to consumers. And what happens after the initial assistance period let’s say it’s three months or so for most banks I think that’s when the real picture emerges for all of us and we start to understand how many people are in devastating financial situation.”
DebtBuster’s says sentiment is shifting and in many households, male breadwinners are now asking for help.
“What we see is that a lot of the fathers who are a little bit younger in their 20s and 30s generally start putting money away for their kid’s education especially tertiary and secondary education. And those who are a little bit older and the kids are out of the house when they come to us they say they need to leave a legacy to make sure their kids are debt-free. ”
In the video below the plight of indebted consumers is discussed: