Educated are stressed on debt
March 7, 2008
By SLINDILE KHANYILE
Durban - Sixty-four percent of South Africans believe that many are living beyond their means, according to findings of the Ipsos Markinor socio-political trends survey done last November.
The study defines living beyond ones means as spending more than what you earn. The respondents were divided into four groups according to their education levels.
The survey found that 83 percent of people with tertiary education believed there was high indebtedness among South Africans, while only 73 percent of those with matric thought this was the case.
Fifty-nine percent of people with some high school education thought that many people lived beyond their means, as opposed to 51 percent in the group of people without education.
The results show heightened awareness of overindebtedness among the middle class, appearing to confirm suggestions that it is this segment of the population that is being strained by high levels of debt.
The bi-annual survey was first done in 1990 and involves the random interviewing of 3 500 people across the country.
There were also different perceptions of insolvency among the races. Indians, with 89 percent, were the largest group believing that people were overextending themselves financially. They were followed by coloureds (81 percent), whites (76 percent) and blacks (59 percent).
Mari Harris, managing executive for business development and public affairs at Ipsos Markinor, said people were asked about spending for the first time last year because other surveys had shown that the introduction of the National Credit Act, which tightens lending, and interest rates hikes had been a big concern for many people. Harris added, however, that they did not ask respondents what they overspent on and why they spent more than their earnings.
Thirty-nine percent of respondents admitted that they tended to spend money they did not really have. A racial breakdown showed that blacks represented 42 percent of those who said they tended to overspend, followed by coloureds, Indians and whites.
Dawie Spangenberg, head of credit and risk at First National Bank home loans, said the escalating interest rates had heightened the pressure on overindebted consumers. He said this pressure was set to rise with the present debt-to-income levels and interest rates.
Spangenberg said defaults in the residential property market had shot up by 107 percent in the six months to January.
The Reserve Bank has increased interest rates eight times since 2006 in an effort to curb overspending by consumers. The benchmark prime rate now stands at 14.5 percent.
The survey found that only 24 percent of the population supported the notion that higher interest rates would tighten the belt on consumer spending.
According to the income and expenditure survey findings released by Statistics SA this week, households are increasingly spending their money on buying and maintaining cars. Of the total household expenditure, housing, water, electricity and gas absorbed nearly 24 percent of money spent.
Pragnesh Desai, head of credit risk monitoring at Nedbank, agreed that borrowers had overextended themselves in their consumption of credit.
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