Increase in debt civil cases ‘a cause for concern’

The recent statistics of civil cases for debt indicate that South Africans are over indebted. So says Professor Willem H. Boshoff, director of the centre for competition law and economics at Stellenbosch University.

According to the publication released by StatsSA on 19 April, the number of judgements issued for debts decreased while their value increased. The total value of civil judgements recorded for debt increased by 13,9% in the 3 months ended February 2018 compared with the 3 months ended February 2017.   

The largest contributions to the increase were the value of judgements relating to rent, ‘other’ debts, money lent and promissory notes.

“In February 2018, 18 254 civil judgements for debt amounting to R335,4 million were recorded,” reads the publication.

“This is an indication that households are over-indebted and is a reflection of the slow economic growth of the past few years,” commented Boshoff.

 “It is also cause for concern, given that interest rates are likely to rise in future,” he warned.

The publication also showed that the total number of civil summonses issued for debt decreased by 3,4% in the 3 months ended February 2018 compared with the 3 months ended February 2017.

It showed that money lent and promissory notes were the major contributors to the decrease. According to the publication these contributed 4.6 % and 1.7 % points respectively.

 “One should be careful to look at the number for a specific month and rather consider the longer-running trends. These show the number of summonses to be relatively stable over the past four years,” said Boshoff.

“This suggests that the credit position of households has not really improved. It supports the general conclusion that South African households still rely too much on credit to make ends meet,” he added.

Adding a different view, Laura Campbell, economist from Econometrix, said that the latest data of debt civil cases showed the financial position of South African households has improved.

She said that households have more disposable income due to low inflation and interest hence the drop in summonses.

“Insofar as the data on civil cases for debt reflect the financial position of households, they continue to indicate that household balance sheets have benefitted from subdued inflation and low interest,’’ noted Campbell.

She added that debt counselling is another factor that could have contributed to the drop in summonses.

“The effects of the National Credit Act, which was introduced in June 2007, was to enable debtors unable to meet their debt repayments to seek debt counselling. This has in turn reduced the number of civil cases for debt,” said Campbell.

Boshoff advised South Africans to be careful not to take credit for unnecessary expenditure.

“South Africans should economise on especially clothing and accessories such as expensive phones, which are often reasons for incurring short-term credit.”