After the Christmas holidays many of us take a long hard look at our household budgets. Particularly during the past few years of recession, the amount of debt being taken on by consumers in Europe at least has been falling dramatically. It may have taken a decade or so but in Europe people are beginning to realise that large amounts of debt are an unsustainable way to live your life.
It looks like South African consumers however are making the very same mistake that we did – shopping on credit, treating themselves on luxury goods finance by bank loans and credit sources. It doesn’t help that a lot of South Africans are just very bad savers, preferring to spend now and worry about the future later. But as anyone who has experienced a hiccup in life – savings usually make it a lot more manageable than none.
Many financial journalists are pointing the finger at the many available sources of easy credit in the country. Just like in Europe over the past few years, getting credit is a simple tasks whether through loans, mortgages or other financial instruments. But it’s beginning to look like a problems in South Africa, figures like over 75% household debt of an average salary are extremely high. South Africans spend something like 7% of their incomes simply servicing these debts.
The world is opening up to South Africans and they have ready access to luxury goods and items that were often in short supply during periods of isolation. Many South Africans watch TV and adverts in the UK and the USA to select their purchases. Using technology like VPNs and proxies as illustrated here, they can utilise the internet to watch british tv anywhere, they have a European lifestyle to some extent and are walking into the same debt trap. Of course the cynical would also suggest that President Zuma’s extravagant lifestyle doesn’t really help set a very good example either of course!