Q1 2021 sees continuing deterioration for youth
As South Africa heads into its third wave, South Africans are still battling with debt pressure. Eighty20’s Credit Stress Report 2021 Q1 – compiled in collaboration with XDS – offers some insight.
The data on South Africa’s economy outlines the damage wrought by Covid in 2020 with the economy contracting 7% in the year. The IMF predicts growth in 2021 will be around 3.1%, the Beeld Consensus predicting 3.6% growth, compared with global growth estimated at 6%. Crude oil prices reflected this optimism with significant price increases propelled by expectations of a quicker and stronger recovery in global growth. Oil prices recently reached a two year high.
One of the most striking findings was the 4% increase in the proportion of 18-24 year olds defaulting. If this proportion continues to increase at the same rate that it has for the past 3 years, 100% of the credit active individuals between 18-24 will be in default by the year 2027.
Retail seems to make a (small) comeback
The number of retail accounts grew by 156,000 – the first QoQ growth in a year. This coincided with the first increase in retail sales (2.3% in February) since before the hard Lockdown. The biggest drivers of this growth were household furniture, appliances and equipment. The biggest losers were pharmaceuticals, cosmetics, and toiletries.
Overdue debt balances growth slows
The overdue balance did not grow at the same rate we say last quarter, but the current balance on loans increased by R4.5bn (half what it was last quarter). The number of loans in good standing is down 7% on last year while the proportion of mostly unrecoverable loans (9+ months in arrears) continued to increase.
Upper Income in Turmoil
This quarter saw a continued increase in the proportion of defaulters across all income brackets, but there was particular trauma with the wealthy. There was a 4% increase in the number of credit active consumers earning more than R60 000 per month, but their default proportion also increased – by 8% QoQ. Vehicle Finance suffered in particular, with nearly 1 in 3 people in this segment who are in default are delinquent on a car loan. Further, of those earning more than R60,000 per month, 1 in 3 defaulters are defaulting on a VAF.
Concerns for 2021
“One of the biggest takeaways is the bleak outlook for the credit worthiness of the youth of this country. A credit score might not seem important when you are 22, but could come back to haunt you later when you want to purchase a car or house. If the current growth in defaulters continues, in six years 100% of the credit active individuals between 18-24 could be in default. Considering that the unemployment rate hit yet another high of 32.6% in Q1, and 63.3% for youth,” says Andrew Fulton, Director at Eighty20.
One ray of hope for 2021 is that the vaccine roll out has commenced in earnest in South Africa, and the positivity coming from North America, where millions have been vaccinated, indicates vaccines will allow the country to start its economic recovery in earnest as well.
Eighty20 and XDS have created a National Segmentation (ENS) Customer Profiling Tool. The ENS, while protecting customer privacy and data protection, enables the most comprehensive view of South African adults. Using statistical techniques to overlay diverse datasets, including credit bureau, national and regional surveys, thousands of variables are mapped to each consumer. Your consumers are mapped to one of 1,500 micro-segments, 48 sub-segments and 8 segments using either SA ID, mobile number or key variables such as age, income and gender. Find out more here or call us for more information.