S.Africa Consumer Credit Index declines in Q1 2014 - CNBC Africa

S.Africa Consumer Credit Index declines in Q1 2014


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Credit cards. PHOTO: Getty Images

The deterioration, according to the company, marks a decline for the ninth straight quarter.

“At the base of it all is economic growth, and as we’ve seen it continues to look anaemic. There’s going to have to be some change in terms of employment if the overall economy and consumer credit health is going to change drastically,” Geoff Miller, CEO of TransUnion, told CNBC Africa.

Miller added that there are no expectations for a drastic change in the short to medium term, and that current strikes and rising inflation will keep consumers under pressure for a longer period of time.

The TransUnion distressed borrowing indicator increased 1.8 per cent year on year in the first quarter of 2014, indicating additonal budgetary strain among households.

The index rose to 49.4 in the first quarter of 2014 from a revised 48.9 in the third quarter of 2013. The deterioration is however moderate, but spells a trend that is likely to continue.

Miller explained that a number of consumers had been unable to pay their debts in the last eight quarters, resulting in a rise in delinquencies.

This has however started to level off as banks and financial institutions have become significantly proactive in the last 18 to 24 months by tightening credit policy, affordability guidelines.

(WATCH VIDEO: Maintaining a good credit record)

The tightening also contributed to the rate of new consumer loan defaults, which remained steady in in the first quarter of 2014 compared with the fourth quarter of 2013.

This translated into a 1.8 per cent year on year slowdown in new defaults from the first quarter of 2013 to the first quarter of 2014.

Unsecure lenders have also put in similar measures to keep consumer credit in check, but Miller explained that consumers in the unsecured lending space are slightly more at risk.

(READ MORE: Credit risk costing S.Africa's consmers)

“They’ve made some proactive credit policy measures, so I think that the consumer that they’re bringing on seemed to be fairly healthy. However, they still have a tremendous amount of debt that they’ve written over the last 36 months,” said Miller.

“Those consumers are very much at risk given interest rate increases happening with inflation so I think things may have stabilised but I don’t think they’re out of the woods yet.”