On Thursday, Transaction Capital Risk Services (TCRS), sister company to minibus taxi financier SA Taxi, said a combination of job losses and disruption in many creditors' collections processes had raised the possibility that more consumers will default on their debt, despite relief measures like record-low interest rates and bank repayment holidays that ended in June.

TCRS, which specialises in debt collection and buys books that have been written off or are close to being written off by credit providers, published its Consumer Credit Rehabilitation Index (CCRI) for the second quarter of 2020.

The index, which measures consumer credit rehabilitation prospects, showed that South African consumers’ propensity to repay their debt deteriorated by 2.6% compared to the second quarter of 2019, and by 2.5% when compared to the first three months of 2020. The index samples approximately four million consumers in credit default from TCRS’s proprietary database.

A fall in propensity to repay debts means more people are likely to have defaulted on some or all their debts or will soon do so. The fact that some households took on more debt when most industries were not operating during the hard lockdown means that household debt levels are now likely to be higher than the 72.8% reported in fourth quarter of 2019, further exacerbating  propensity to repay debt, said TCRS.

"The consumer’s propensity to repay debt is highly correlated to employment levels. Consumer sentiment is weak; employment remains under pressure; and key consumer support measures such as the temporary employee relief scheme and debt repayment holidays will expire in the upcoming few months – all adversely impacting the consumer’s ability to service debt," said Transaction Capital CEO David Hurwitz.

News24