Credit Stress Report 2021 Q2 is out

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2021 Q2 shows signs of recovery

As South Africa starts to see some signs of recovery, the South African consumer is still under pressure. Eighty20’s 2021 Q2 Credit Stress Report – compiled in collaboration with XDS – unpacks some of these developments, and profiles the credit behaviour of three national segments from its ENS Customer Profiling Tool.

The last quarter saw some possible signs of recovery for South Africa, with the economy showing better growth than expected in the second quarter at 1.2%. Crude oil and commodity prices reflected this optimism with significant price increases propelled by expectations of a quicker and stronger recovery in global growth. Oil prices continue to climb, reaching highs not seen since 2018.

Youth default stabilises

In our last report we highlighted some worrying developments for youth with a 4% increase in the proportion of 18-24 year olds defaulting.  We said that 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 would be in default by the year 2027.  Thankfully the default proportion stabilised in Quarter 2 – we hope this positive trend continues next quarter.

Despite continued concerns, some glimmers of hope

Some other highlights in this report:
  • The current balance on all loans is just over R2 trillion, with half of that value in mortgages, just under a quarter in vehicle asset finance (VAF), and unsecured loans, credit cards and retail accounts making up the other quarter. There was little overall movement in either current or overdue balances this quarter. That said, the trend for VAF is concerning as there has been a 32% increase in overdue balance YoY, with a 17% QoQ increase this quarter alone. 
  • While the number of loans in good standing increased this quarter by 1%, overall that number has shown a 2% decrease YoY. The total number of loans in arrears is down 4% QoQ, with mostly unrecoverable loans (9+ months in arrears) decreasing by 3% (262k) over the same period. 
  • This quarter saw a decrease in the proportion of defaulters across all income brackets. Most noticeable was a 13% QoQ decrease in the default rate for the wealthiest income bracket. This segment was the hardest hit in the previous quarter. Along with a decrease in default rate, this income segment showed a 2% decrease in debt-to-net-income ratio, bringing the ratio to 4.32. This staggering number, however, is less worrying than the ratio for lower income brackets as 94% of the wealthy’s debt is secured compared to just 15% for those in the lowest income bracket.  

Understanding the Mass Credit Market, Middle Class Workers and Heavy Hitters

The Credit Stress Report also highlighted the Eighty20 ENS Customer Profiling Tool, which allows companies to map their customers to thousands of variables in a POPIA compliant manner. In this report we looked at three of these segments, the Mass Credit Market, the Middle Class Workers and the Heavy Hitters:

  • The Mass Credit Market is made up primarily of lower middle class women in occupations such as nursing or teaching.  This segment holds more than half of all retail accounts, and 43% of all unsecured loans in South Africa
  • The Middle Class Workers are just over 4m people who earn on average R13,000 per month.  They aspire to home and car ownership and hold more than a quarter of all car loans and mortgages, despite making up less than 10% of the population
  • The Heavy Hitters, a small group of top earners in South Africa, are predominantly male. They hold nearly 80% of the nearly R1trn in mortgage value and 75% of the nearly R250bn in Vehicle Asset Finance in South Africa. 

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.

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