Credit default rate rises in Q2 2019

Jaco van Jaarsveldt, decision analytics head consulting and marketing services at Experian

The overall default rate reached 3.76% - an increase from the previous quarter’s CDI of 3.56% as well as the year-on-year CDI of 3.53% recorded for Q2 2018. The index measured 14.7-million consumers and relates to 18.2-million active accounts in South Africa.

Rising unemployment hits consumers

Whilst most South African consumers are feeling the pressure of continuous increases in daily living expenses; very low income, mostly unemployed, young families living in small properties or in a room of shared-housing in densely populated areas had the worst CDI, with a composite value of 9.36% in June 2019, deteriorating from 9.11% in June 2018.

“The distressed economy continues to negatively impact on South African consumers’ monthly cash flows, which is further exacerbated by the increase in the unemployment rate which increased to 29% in the second quarter of 2019,” said Jaco van Jaarsveldt, decision analytics head consulting and marketing services at Experian. “These increasing first-time default rates indicate that consumers, who are relying on credit to get through these tough economic times, are unfortunately failing to keep up with their repayments.”

“The worst year-on-year deterioration in composite CDI was observed in the Personal Loan Index, as more consumers turn to cash loans to support their monthly cash flow and debt servicing requirements, says Van Jaarsveldt. The CDI deterioration was evident across most of the Experian Mosaic consumer lifestyle segments, indicating that the distress is largely segment agnostic and a general market trend. The personal loan CDI increased to 8.67% (2018: 8.03%) in Q2 2019 and totalled R5.96 billion worth of first-time default value.”