National Consumer Tribunal acting executive chairman Professor Bonke Dumisa has made claims that around 40% of South Africans are living with financial difficulties on a daily basis. With over 10 years of experience at the Tribunal, Dumisa has seen more than his fair share of consumers struggling with debt and losing the fight against creditors to keep their “heads above water”.
After a decade of presiding over consumer cases and seeing the effect that South Africa’s very high level of personal debt is having on the population, Dumisa has one thing to say: consumers must stand up for themselves and fight for their rights.
But are everyday South Africans equipped with the knowledge and tools they need to do this?
Access to resources is tough for low income consumers
Speaking specifically about the situation in KwaZulu-Natal, but tackling issues which affect consumers across the nation, Dumisa suggested that the amount of information only accessible online was one of the biggest barriers to consumers getting access to the information they need to stand their corner and take smart steps when financial and debt difficulties arise.
With resources like Wonga.co.za‘s Money Academy videos (including sections on dealing with debt) and information about debt counseling available exclusively online, many of the province’s poorest are unable to educate and inform themselves in order to improve their position. They are also unable to access information which would help them to avoid similar pitfalls in future when it comes to common problems such as falling into debt spirals.
“Bad debt” is a slippery slope
According to Dumisa: “You will find a person renting a property for R86 000 a month and driving a nice car but they want their debt to be rearranged”. This is a powerful example of the poor level of financial awareness and education which is currently blighting South Africa, making the nation one of the most personally indebted on earth. In fact, in 2014, South Africans were the world’s biggest borrowers.
A lack of understanding of what constitutes “good debt” and what constitutes “bad debt” is a serious concern for many financial experts surveying the current debt landscape in South Africa. While good debts, such as student loans and affordable mortgages, are an investment in a more financially stable future – and have realistic repayments – loans used for luxuries (for example holidays and shopping sprees), with higher levels of interest, are characterized as bad debt. With 11 million households described as “over-indebted” in 2014.
Financial education: the next step
Although numerous bodies and companies within the financial sector, including Government initiatives, have been working to improve financial literacy (including understanding of different types of debt) as early as 2012, many believe that now is the time to unify these disjointed schemes, take financial education offline and deliver it to those who need it most.
How do you think financial education should be delivered in South Africa? Do you think South African consumers lack the skills to stand up to creditors and stand up for their rights? Would financial education help? Have your say below.