SA private sector owes R2.5 trillion

South Africa’s private sector credit balances, comprising corporate and household credit, stood at nearly R2.5 trillion at the end of last month, according to  figures released by ABSA yesterday.

Household credit balances alone were at R1.3 trillion, the bulk of these being in mortgages which accounted for R1.1 trillion.

Household mortgage balances stood at R798.2 billion.

South African consumers are under pressure with most surviving on their credit cards to make ends meet.

Trans Union, a credit and information management company, said that credit health was deteriorating and could see more households missing on loan repayments.

Consumer spending patterns were also likely to be affected with people cutting back on non-essential purchases.

SA consumers under pressure

South African consumers are under pressure. The Consumer Credit Index compiled by Trans Union, one of the global leaders in credit and information management fell in the second quarter of this year to 43.6 percent down from 50.0 a year ago.

The index is designed to fluctuate from a minimum of 0.0 to a maximum of 100.0 with 50.0 being the breakeven point.

Levels above 50.0 are associated with higher rates of loan repayment, lower credit card utilisation, improving household cashflow, lower interest rates and credit deleveraging.

The current figure of 43.6 indicates moderate deterioration.  Any figure below 40 is strong deterioration.

The CCI averaged 62.8 in 2010, dropped to 55.7 in 2011 and averaged 50.4 last year. It stood at 42.3 in 2007-208.

According to Trans Union the latest figures show that credit health is deteriorating and could see more households missing on loan repayments.

Consumer spending patterns are also likely to be affected with people cutting back on non-essential purchases.

“Under such a scenario, big-ticket durables, entertainment, and non-essential retail sectors are likely to be impacted earliest and most negatively,” the company says.

Do you earn R3 500 to R15 000 and want a house?

The government has unveiled a plan to provide guarantees for housing loans for people earning above R3 500 up to R15 000 to enable them to obtain bonds from banks.

The scheme called the Finance Linked Individual Subsidy Programme (FLISP) will be implemented through the National Housing Finance Corporation.

Human Settlements Minister Tokyo Sexwale said last week the scheme would benefit, among others, school teachers and principals, police and members of the armed forces, nurses, firemen, prison warders and blue collar workers.

People who earn R3 500 and below are catered for under another programme but Sexwale said FLISP might be the way to go in future because continued allocation of grants for housing for the poor was not sustainable.

“To all those people lost in the GAP market- earning too much to qualify for an RDP house and too little to access bank finance, we say: Rest assured. This government cares, we back you to get your bond!”

The minister said: “It is noteworthy to note that the assistance we provide to our citizens in this regard- black and white- empowers them to become real estate owners, to become real participants in the capital markets as asset owners, real players in the property market as sellers or buyers as well as in the financial markets where they can borrow against their assets to advance other economic interests.”

To provide houses for this group, it was essential to deracialise residential space in the country. Sexwale outlined seven things that would be done to speed this up.

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• Firstly, banks would be obliged to provide loans to blacks desiring to buy property in previously white suburbs.
• Secondly, the Social Housing Regulatory Authority has been purchasing high rise buildings in the centres of major towns and cities and refurbishing them and converting them from offices to rented family units, some with an option to buy.
• Thirdly, the Housing Development Agency has acquired land parcels inside cities  and they will be used to settle families.
• Fourthly, land on the city boundaries is being acquired for housing construction in partnership with the private sector.
•  Fifthly, vacant land between cities and townships such as between Johannesburg and Soweto, Cape Town and Gugulethu, Pretoria and Mamelodi, Durban and Umlazi, Port Elizabeth and KwaZakhele, will be used to build housing to locate people closer to towns and cities.
• Sixthly, townships will be upgraded to improve the quality of life of the inhabitants.
• Seventhly, new non-racial towns like Lephalale, Joe Slovo City, will be built.

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Long wait for the poor to get housing

The South African government rolled out 750 000 houses for the poor in the last four years bringing the total to 3.3 million since 1994 but there is still a backlog of 2.1 million houses for between eight and 10 million people.

Though the ruling African National Congress if committed to the poor and shall not abandon them, Human Settlements Minister Tokyo Sexwale said on Wednesday the continuous allocation of grants for free housing to the poor was not sustainable.

Sexwale said the houses for the poor, those earning below R3 500, had been provided at a cost of R85 000 each.

“Quite clearly, the continuous allocation of grants for free housing to the poorest of the poor is unsustainable going forward,” he said. “Strictly speaking, this is more of a welfare programme approach than a long lasting housing policy as this programme is driven by the triple evils of unemployment, poverty and inequity.”

But he added: “For as long as this is the case, so long shall this programme remain because we as the ANC government are committed to the poor and shall not abandon them through no fault of their own.”

But for those waiting for government houses, it might be a long wait.

Already the government is providing social grants to 16.1 million people.

More South Africans receiving social grants than those working

Figures don’t lie! Or do they? South Africa’s latest labour survey shows that 44 000 jobs were created in the first quarter of this year increasing the number of people in formal employment to 13.6 million.

In his budget for 2013 Finance Minister Pravin Gordhan said 16.1 million South African were receiving social grants, almost three million more than those employed.

Statistics South Africa says the total population is estimated at 52.98 million by mid 2013.

Employment is on the rise but has not reached the 2008 peak of 14 million people. It hit a low of 12.9 million in 2010.

Unemployment figures were a bit disturbing. Though 44 000 jobs were created in the first quarter, unemployment increased by 100 000 to 4.6 million.

A staggering 2.3 million were classified as discouraged work seekers. Almost two-thirds of those unemployed had been looking for jobs for a year and more and 59.4 of them do not have Matric.

More than half of those unemployed, 52.9 percent, were aged between 15 and 24 but if the age band was widened to 15 to 34 the figure of the unemployed shot up to 70.7 percent.

Of the 16.1 million receiving social grants 11.4 million were receiving child support, 2.9 million old age grants and 1.2 million disability grants.

Kwazulu-Natal had the highest number of those receiving grants at 3.9 million, followed by Eastern Cape with 2.7 million and Gauteng at 2.2 million.

Northern Cape had the lowest number at only 419 000.

What do all these figures mean? I am not an economist or social scientist. But I think the issue needs to be debated considering that the number of those on grants is expected to increase to 17.2 million by 2015/2016.

Gordhan said only 2.5 million were receiving grants in 1998.