A third of the South African middle class is to be wiped out: the lender

Financial services company Transaction Capital has released its results for the half year ended March 31, 2021. The group warns that the Covid-19 pandemic and the weaker economy have put a significant strain on medium-sized South Africans.

Citing credit statistics, wage data and unemployment figures, the group said that overdue debt balances continue to grow, with an increase of R 33 billion in 2020 alone. Around 38% of the loans are not in good condition.

This goes hand in hand with the highest unemployment rate in 12 years of 32.5%, deteriorating monthly income and a rise under inflation. As, It is projected that 34% of households in South Africa fall out of the middle class, it said.

This is further underlined by wage data: fewer South Africans report incomes in the range of R 22,000 +, while significantly more South Africans see incomes below R 8,000.

These concerns have been confirmed by financial analysts, with the country’s middle class expected to be particularly hard hit as the country begins the recovery from Covid-19.

The number of indebted people relying on their credit to keep them alive has skyrocketed and the South African economy is on the verge of borrowed time, said Hans Overbeek, Cyber ​​Finance founder and chief executive officer.

While the effects are being felt by all sectors and groups, Overbeek said middle-class families are increasingly falling behind.

“Many permanent workers have had to move to contractual or informal employment as companies try to mitigate their own losses,” he said.

Overbeek said more South Africans are also falling into debt as they rely on their credit to support themselves and their families.

“Many people who were on track to pay off their debts prior to the pandemic have now had to take two steps back because they struggled to stay afloat,” he said.

Data from consumer credit reporting firm Experian found that South Africans hardest hit by the economic downturn are those hardest hit by secured loans and other banking products.

These South Africans are increasingly affected than those who had financial difficulties before the Covid-19 pandemic. This was felt particularly strongly in the population groups with higher incomes.

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