Fresh out of university, Lwando* landed his first job as a graphic designer in 2012, earning about R22,000 a month – a lucrative income for a childless young man with parents who didn't bother him for black tax.
His income placed him at some level of comfort where he could buy his first car, rent an apartment in a beautiful suburb in Randburg, Johannesburg, go out with friends to nice restaurants or take his girlfriend to baecations in the Cape.
But this world soon came crashing as the cost of living and inflation started stretching his wallet.
Suddenly dinners at fancy restaurants and trips to Cape Town became few and far between.
“I couldn't make ends meet and I found myself relying a lot on credit to get by. I knew the credit lifestyle wasn't sustainable and I fell into debt. I had to ask my bank to put restrictions on my ability to get further credit so I could deal with my debt. I was not able to get credit for about four years.
“It taught me to be smart about using cash and only buy what I needed. It helped me so much until I got out of bad debt in 2021,” said Lwando.
This year, he was among 6.9-million South Africans who took out credit cards, according to TransUnion's Quarterly Overview of Consumer Credit Trends Released released last week.
The report, which focuses on the first quarter of 2023, paints a resilient and positive picture of credit trends among SA consumers despite the challenging global financial times and inflation.
The positive shift was observed in various product sectors.
About 176,000 new credit cards were originated in the quarter under review, a 27.1% increase from last year.
These cards have R16,000 credit line and of the 6.9-million total number of credit cards, an average balance of R22,473 which is an improvement of 7.6% from last year.
This suggests an escalating trend of credit utilisation among consumers, said the report.
“A strong growth of 27.1% YoY [year-on-year] in the credit card sector was observed, primarily fuelled by younger demographics, such as Gen Z [born 1995–2010] and Millennials [1980–1994], contributing to over two-thirds of new card originations. However, lenders exhibited a cautious outlook by only marginally increasing the average credit limit on new cards despite the surge in demand.
“While serious delinquency rates improved overall, there was a concerning 11% YoY increase in one month overdue accounts. This underscores the need for lenders to ensure proactive credit management and maintain open lines of communication with customers to preserve the market's stability,” read the report.
The document also noted the increase of 5.3% in the number of non-bank personal loans which are valued at R5.6m.
Other positives were 52,223 new home loans that were taken in the first quarter of 2023, an increase of 9.1% from last year. The average home loan was valued at R955,654.
“This growth occurred despite the high interest rate and inflationary environment. It suggests those consumers who intended to buy a home followed through with their intent.
“Average new loan amounts also saw a considerable surge of 21.5% year over year, likely driven by more affluent consumers purchasing high-value properties. This growth can also be attributed to the ongoing semigration within the country as remote working conditions persist post-pandemic,” read the report.
There were also signs of potential strain on consumers' repayment abilities as consecutive increases in the repo rate impact performance.
Accounts with a single month of missed payments surged by 25% year on year.
The vehicle asset finance sector took a bit of a knock this year with some car owners deciding to hold back on making new purchases.
New vehicle finance sale declined by 6.8% compared to last year and this is attributed to rising interest rates, high inflation and a weaker rand.
“Many consumers are holding onto their vehicles for extended periods, and some are exploring alternatives, such as vehicle rentals,” said the report.
While the credit world seems to be getting back on its feet in SA, Lwando says he is planning to navigate it with fresh and new eyes.
“I held off getting credit for about a year or two. I've learnt my lessons from past mistakes. I will only use my credit card for essential things like renting cars and booking flights. I will not be tempted to maxing it,” he said.
*Not his real name
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