SA leans on credit to maintain living standards

Middle-class South Africans are living beyond their means and edging closer to the breadline.

As the economy nosedives, middle-income households are resorting to credit facilities to maintain living standards.

This is according to the latest consumer credit index report released by TransUnion.

It is considered an indicator of consumer credit health.

It takes into account credit behaviour, household cash flow conditions and debt-servicing costs.

"The overall macroeconomic conditions remain rather fragile, so now is no time for complacency," said Geoff Miller, TransUnion Africa's regional president. Revolving credit - which includes credit and store cards - increased from 1.2% in the last quarter to 2% recently.

Economist Russell Lamberti, of ETM Analytics, said "middle- and lower-income households were most severely affected by deteriorating household credit health".

He attributed the trend to those households having more exposure to unsecured lending.

"During challenging economic times these households often utilise revolving credit via store cards and credit cards to augment their disposable income.

"The fact that these households need to access credit to maintain living standards could be an indication that South Africans continue to live beyond their means." He added that it was also indicative of the country's struggle to "create wealth in a depressed economic environment".

The Pietermaritzburg Agency for Community Social Action barometer - which measures food prices month by month - showed that the cost of a basic food basket had increased by 1.4% from R1887.83 in June to R1914.29 last month. Lamberti said in South Africa's current economic environment the main factors impending household cash flow was "particularly sticky inflation for non-discretionary goods such as food".

"Households are being forced to fork out more for essential goods, which leaves little spending capacity for purchases of durable and nonessential goods.

"Real wage growth is simply not keeping up with non-discretionary goods inflation," Lamberti added.

Durban teacher Tanusta Jainarain said she was forced to use her credit and store cards more because of the high cost of living.

"I am feeling the constraints. Everything is highly overpriced and even an increase in salary can't match the inflation rate.

"We use credit and store cards more because there doesn't seem to be anything we can cut back on.

"Food and medical bills are unbelievable.

"South Africa has become a very expensive country to live in," Jainarain said.