Statistics revealed by the South Africa Reserve Bank in the past decade are a reflection that the country’s economy is in turmoil as a result of so much credit hence its citizens are sunk in debts.
The statistics illustrate that total household liabilities amounted to R1 378 billion of which 95.5% is consumer credit with other debt and liabilities 4.1%. In other statistics provided by the central bank, local governments are owed an outsized R76.6 billion while households owe two thirds of that figure.
In other figures from Statistics South Africa, 8 million South African households are at pains to pay debts yet more debt is being accumulated with a 22.91% increase in new credit approvals being recorded. The end result of such statistics is that almost 70% of average household income goes to debt servicing and household disposable incomes is thus heavily affected.
The above are some of the reasons why approximately two million South Africans have been blacklisted. While the South African government has put in place measures such as the national credit and magistrate acts bent on easing this setback, the attempts have not resolved the problem.
According to IMF, adopting debt target could help to strengthen South Africa’s budget framework, with the nation’s burden set to reach an estimated 56.3 percent of gross domestic product (GDP) in 2019.
In a related development, the fiscal consolidation announced by Finance Minister Nhlanhla Nene in his medium term budget in October was significant, but may not be sufficient to stabilize debt over the medium term.
The Minister said debt would rise to 49.8 percent of GDP in 2018 and that public debt was approaching the limits of sustainability. He announced plans to rectify spending growth and increase revenue over the next two years to limit the budget deficit. That debt ratio according to the central bank would be 47.6 percent after adjustments made to GDP last month.
The Minister plans to curb the fiscal gap to 2.5 percent of GDP in three years from 4.1 percent this year.