IN THE RED

Our debt robs us of joy

The average South African spends 75% of their income on debt repayments, and behind the statistic are many tales of stress and suffering. Leonie Wagner spoke to two people who found themselves trapped in a nightmarish downward spiral

In a dimly lit backroom in Soweto, Nikita, 32, had a choice to make: groceries or medical aid. Having downscaled, she’d now run out of money, hope and explanations to give to her then eight-year-old daughter about their precarious financial situation. Nikita was drowning in debt. “I started spiralling deeper into debt around 2016, and by 2017 I realised I was in a mess. We moved from one backroom to the next to keep rental expenses to an absolute minimum. I would only use my car for emergencies, to save petrol, and the rest of the time we used public transport or walked because it was cheaper. I had to cancel my medical aid and car insurance so that that money could go towards rent and groceries,” Nikita said. The single mother was doing her Masters degree and had qualified as a psychometrist. But when her debt started taking a toll on her mental health she was unable to complete her research report or repay her student debt, derailing her plans to become a psychologist. Unemployed and without support from her family, she accumulated more debt while struggling to find work. By 2018 her debt exceeded R500,000, made up of student loans, personal loans, her car and credit cards. “When you realise you’re in a hole that’s more than six feet deep, it’s a dark place. I also had to deal with feelings of failure. When you’re a high functioning individual, that pressure of having a certain perception [of

yourself] sometimes means you’re not able to say I’m suffering and need help or I’m drowning to the point of feeling suicidal,” she said.

Finally, her luck turned and she got a job as an HR co-ordinator in 2018. But her relief was short-lived when the reality set in that most of her salary would go towards debt repayments. Still needing to use her credit card for essentials like toiletries and food, she knew she would have to find ways to supplement her income. So she started working as an au pair at night and waitressing on weekends.

“Everything you do is to pay off your debt. You become a slave to your debt. After my nine-to-five I would go to my night job. On Fridays when everyone else was winding down and getting ready to relax I was getting ready for my weekend job. I couldn’t rest on weekends because I was working. It’s that sense of feeling like a corpse, a ghost version of yourself,” Nikita said.

Having to drop out of her Masters due to unpaid student loans was a painful pill to swallow. But Nikita refused to compromise on her daughter’s education and often used her credit card, incurring more debt, to pay for semi-private school fees. This often led to difficult conversations with the teen about why there were so many cost-cutting measures in their home.

“It’s inevitable that when children go to school they compare their lunch, they see how their friends live and they can see the difference and there’s this realisation that there’s a different life and we are not participating in it. Sometimes giving your child hope that everything will work out is hard, especially when you aren’t sure exactly how, but I did it anyway. Then at night I’d kick myself and think I should have done better,” she said.

Nikita would have some solace when her daughter could get a lift with a cousin at the same school. On those days she knew that her daughter would have had a decent meal.

It’s taken her seven years, but this month she reached her goal of paying off her student debt and has been able to re-register for her Masters. For Nikita they were long years of paying amounts of R50, R100 and R500.

At the time it felt like these minuscule payments were barely chipping away at the iceberg of debt.

In November they moved from a Soweto backroom to a flat in Sophiatown, Johannesburg. Nikita isn’t out of the red just yet, but with her student debt paid off she can slowly start to live again.

“You can’t live when you’re in debt. Even walking into McDonald’s is a risk. There’s nothing to look forward to; life is grey. Debt robs you of joy, it robs you of your vitality, it’s like acid that erodes your joy. It’s nightmarish,” Nikita said.

Also living in a debt nightmare is Tshepo, 30, of Mangaung, Bloemfontein. When he lost his job in March, he knew it was only a matter of time before his Mini Cooper was repossessed. Desperate to hold on to his dream car, the admin clerk took to the busy Fairways Taxi Rank in Bloemfontein, using his culinary skills to make ends meet by baking biscuits and selling them from 4am every morning.

For several months he was able to pay his car instalments. His sweet treats were a hit and on good days he could rake in up to R1,200. He took bulk orders for funerals and long distance trips. But by November the increase and unpredictability of blackouts in his area meant he was struggling to meet clients’ delivery demands. His business suffered and he was forced to cancel his car insurance.

The year before he lost his job at a laboratory, Tshepo took out a personal loan to start a business. The plans were drawn up and the avid chef was looking forward to not only building a house but operating a car wash and chisa nyama from the premises. Now unemployed, he spiralled deeper into debt and started defaulting on loan repayments and car instalments.

“After I had to cancel my car insurance, I was forced to move back home and now I rely on my mom, who is a cleaner. As a man I’m ashamed. It’s depressing. I’m not sleeping. It got so bad I started self-medicating. I had to ask my aunt for meds just to help me sleep and cope with the anxiety and depression,” Tshepo said.

Despite having a certificate in criminal justice from Unisa, Tshepo has been unable to find work. He’s resorted to lying in job applications, but nothing has worked. For now, his dream of having the first chisa nyama and car wash in his area have been put on hold. He still has his car, but making this month’s payment meant he had to borrow from friends and family.

‘I’m losing the battle’

“It’s terrible. I’m scared I’ll end up losing my car. I have to go to my happy place just to forget about my debt problems and sleep. My happy place is the day when everything is okay, when I’ve paid my debt and my business plan is approved. But right now I’m losing the battle,” Tshepo said.

Nikita and Tshepo’s stories aren’t unique.

TransUnion Africa CEO Lee Naik said in the company’s latest Consumer Pulse Survey as many as six out of 10 consumers are struggling to pay their bills.

“This week’s interest rate hike, together with another increase in fuel prices next month, is only going to pile on the pressure. For many consumers, January is the hardest financial month of the year. However, 2023 could well be one of the most difficult years in recent history. January, however, is when decreased income is most felt as expenses increase. January is when insurance and investment premiums increase, children need to go back to school with oneoff expenses and fee increases, as various service providers pass on the effects of inflationary increases. More and more businesses are calling workers back to the office, further increasing consumers’ monthly travel expenses,” Naik said.

With about six weeks between the payment of December and January salaries the term “Januworry” has been coined.

Charnel Collins, CEO at National Debt Advisors, said they have 5,415 more people on their books this year than they did in January last year.

According to the Trading economics report released in July 2022 the household debt to income ratio in South Africa was at 67% and expected to reach 75% by the end of the year. This is the percentage of monthly income used to pay debt, meaning for the average South African 75% of income goes towards debt repayments. Collins said this paints a grim picture as anything above 43% is considered too high and a good ratio should stand at 36% or less.

Like Nikita and Tshepo, many people in debt are spending their money on day-to-day needs.

“This is also reflected in the type of debt they have. The bulk of most consumer debt is not from secured debt — namely a bond or vehicle finance — but from unsecured debt such as personal loans, credit card debt and overdraft which often goes to servicing expenses such as food, clothing, entertainment and unexpected emergencies,” Collins said.

National Debt Advisor clients include a 49-yearold company director who has more than R4m in debt, while a lab supervisor and an industrial sales specialist, both in their late 30s, have debts

Even walking into McDonald’s is a risk. There’s nothing to look forward to, life is grey. Debt robs you of joy, it robs you of your vitality

After I had to cancel my car insurance, I was forced to move back home and now I rely on my mom who is a cleaner. As a man I’m ashamed. It’s depressing. I’m not sleeping,”

amounting to R3.5m.

A 27-year-old male in tech support recently bought a house on a bond and ended up accumulating debt to service household expenses due to the decrease in his disposable income. His debt is currently at just over R480,000.

With nearly R250,000 in debt, a 62-year-old receptionist has been struggling for more than two years after losing her husband and breadwinner three years ago. Like Nikita, being a single parent forced her to resort to loans.

Another 29-year-old single parent, a security guard, found himself accumulating almost R80,000 in debt to service unplanned expenses while taking care of his two children. His most recent major loan was to pay for school fees. He accumulated the bulk of his debt through credit cards.

Collins said: “In these tough economic times, many people are having to borrow in a bid to make their money stretch to the end of the month. However, the saddest part about someone feeling overwhelmed by their debt obligations is that they feel like they are alone and there is no way out. This could not be further from the truth. Over-indebtedness is a very common thing among South Africans and though it may not be easy, becoming debt-free again is very much possible.”

Benay Sager of Debt Busters confirmed that the busiest time for debt counselling inquiries is January to March. The blackouts and increased cost of living would continue to add pressure on the coffers of many South Africans, he said.

“Inflation and the interest rate hike are taking a toll on consumers as well as the lingering effects of Covid. Even before the pandemic, we were in a difficult situation. Because of lockdown people’s income was severely curtailed. The electricity situation is going to make life difficult for small business. The mood is gloomy due to the lack of certainty,” Sager said.