Credit Stress Report 2022 Q1 is out
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2022 Q1 saw South Africa coming out of a relatively robust holiday period, into the headwinds of the biggest European war since WWII. Fears of a US recession and rising global inflation have compounded matters.
The Eighty20 / XDS Credit Stress Report is framed by the notable local and global economic, political and other events that impact economic indicators and credit use in South Africa. The biggest story of the first quarter was Russia’s invasion of the Ukraine, which has destabilised the world economy in terms of energy prices, logistics and inflation.
While we are noticing the impacts of inflation, petrol price increases and rand instability more in our current quarter, the seeds were sown in 2022 Q1.
Following trends elsewhere on the globe, SA inflation bumped up dangerously close to the 6% target set by the Reserve Bank. Petrol and diesel prices continued to rise, with a follow-on impact on inflation.
On a more positive note, real GDP for 2021 rose by 4.9% after the 6.4% contraction in 2020. Although still below 2021 Q2 levels, the total balances for debts that are 30+ days in arrears has decreased QoQ, by R6.7bn – 3.4% – for the first time in more than two years.
On the Credit side, the number of credit active individuals continued its three quarter rise, albeit still below 2020 levels. The current balance of loans also continued to rise despite the total number of loans dropping by more than a quarter million since December.
Unsecured vs Secured Credit
For the first time in more than two years, the total balance of loans that are 30+ days in arrears has decreased QoQ, by R6.7bn (3.4%). This is despite a 1.6% (R35bn) increase in the current balance on loans QoQ. The total number of loans continues to drop – by more than a quarter of a million loans (0.6%) – this period.
Credit Accounts by Arrears Status
Despite decreases in total balances of loans 30+ days in arrears this quarter, the number of loans in arrears increased by 0.5% (88,000 loans) QoQ. Loans in arrears now make up 38.7% of open loans, or 8.8% of loan value. Loans 9+ months in arrears (which make up half of all loans in arrears) increased for the fourth quarter in a row this period, rising by 0.4% QoQ (1.5% YoY).
Consumer Default by Age
The total number of credit active individuals has remained below 19m for a year now, but has grown for the past three quarters. The age of credit active individuals appears to be rising. There was a noticeable YoY drop in younger age groups, with 6.7% (305 003) fewer 18 – 24 year olds and 3.5% (141 926) fewer 25 – 34 year olds. The 55+ age group, however, has seen a 1.9% (223 683) increase over the past year. This quarter, 3.8m loans have gone 60-90 days in arrears, an increase of 4.1% QoQ.
Eighty20 National Segmentation Comparison
The Eighty20 National Segmentation tool divides the South African population into eight segments. Each segment is representative of a homogenous population in South Africa, from a very poor segment such as the Hustling Males, to a working class segment called the Mass Credit Market, and a wealthy segment called the Heavy Hitters.
This quarter we looked at the credit holdings, in particular loan type and amount in default, of the four wealthiest segments:
Comfortable Retirees: 1.7m Older, high income, credit active (76%) and asset rich ex-professionals. Total loan value per person is less than one quarter of that of the Heavy Hitters. While they have low default rates overall, nearly half of those with unsecured credit are in default.
Mass Credit Market: The 11.7m employed, lower middle class, 80% of whom have retail credit while 17% have credit cards. While most have retail credit, these accounts only make up 21% of their total loan value. Personal loans for this segment is 49% of loan value. The Mass Credit Market makes up 51% of credit active individuals.
Middle Class Workers: The 4.1m middle income, credit active individuals with families, cars (22% have VAF) and mortgages (21%). On average each person has 3.7 loans, and their total loan value is 3.4 times the Mass Credit Market, despite only comprising a third of the credit active population. The majority of the loan value comes from secured loans.
Heavy Hitters: The wealthiest 2.9m in the country, with a massive debt load. They account for 61.5% of the total loan value in South Africa, despite only making up 10.5% of the credit active population. On average, each person has five loans. This segment has the lowest proportion of individuals in default.
As with many things in the credit bureau data, it is important to understand the definitions of the various terms we use. In our report:
- Total Annual Spend – Total annual spend of entire segment (not just credit active)
- Proportion of Value Default – Proportion of that loan category value that is default
- Total Loan Value – Total value of all loans in given category
- Default Rate – Proportion of individuals with at least 1 loan in default
Eighty20’s Credit Stress Report 2022 Q1 – compiled in collaboration with XDS – unpacks some of the developments highlighted.
Download the Credit Stress Report
The credit data used to compile our Credit Stress Reports is taken from the Eighty20 Credit Portal. This online data tool allows you to analyse the credit behaviour of ~20m credit-active South Africans and ~50m loans. To explore the information highlighted in our Credit Stress Report 2022 Q1, you can subscribe to our Credit Portal here.