The collapse of the African Bank in 2014, crippled by rising costs and unpaid loans, forced the South African Reserve Bank to step in in order to resolve the issue, but it signalled a worrying trend engulfing the country: too many South Africans are in debt and the trend is simply not sustainable.
Jordan says South Africans have been spending without thinking of the consequences, causing a never ending spiral which they struggle to get out of.
Over-indebted consumers
"The Western Cape provincial manager, Karam Singh, illustrated the issue and revealed that more than 11 million of South Africa's credit-active consumers are over-indebted. Several micro lenders have been assigned a large chunk of the blame and are the cause of the financial headache amongst consumers. Citizens are struggling to repay loans, which could lead to a backlash from the public as interest rates soar," he says.
He further adds that debt has become such a problem that consumers have resorted to taking new loans in order to pay for previous loans. "This can be attributed to many factors which include the continuous rise in living costs as well as the tendency to spend impulsively. A nationwide cash shortage is also to blame for putting consumers in a spiral of debt."
Standard Bank also released statistics that only 42% of South African adults have a plan in place to save money. The remaining 58% are left with no life ring should the debt tide rise.
All is not lost
Jordan states that all is not lost for consumers who feel they are caught in the debt spiral. "At IMB we specialise in curing the debt hangover by looking at solutions to assist in minimising debit. These can range from the protection of debit orders, credit and debt management, to personalised perspectives on how to get out of debt. It is possible for everyday South Africans to extricate themselves from debt."
Jordan provides five practical tips on how to start getting out of debt:
