As in any economy, households in South Africa incur debt in their attempt to sustain or improve their livelihoods (James 2014). Such debt, whether formal or informal, is used to complement income or savings to pay for various household expenditures. These expenditures are either to acquire an asset or service that appreciates in value (e.g. a house, business or education), or to fund short-term consumption (e.g. food, clothes, holiday expenses or unforeseen expenses). However debt does not become a burden for everyone. A person who is able to maintain debt payments will benefit greatly from the assets acquired, while someone who cannot maintain their debt repayments might require further loans or feel the effects of anxiety and depression related to debt repayments (Smit 2015; National Debt Advisors 2017).
The GCRO’s Quality of Life (QoL) V (2017/18) survey, which was released on November 13, 2018, sheds light on the issue of debt in Gauteng. In the QoL V survey, all respondents were asked whether they personally owed money to anyone else (including a bank, shop, or money lender). In a follow up question, respondents with debt were also asked if they had missed a debt repayment in the three months before the interview. Here we analyse and map the responses to these two questions and also compare with the relevant responses from previous QoL surveys.
Figure 1 shows that the proportion of respondents with debt increased from 26% in 2011 to 40% in 2015/16, before declining to 35% in 2017/18 QoL survey. This shows that debt remains common for at least a quarter of Gauteng residents across all QoL surveys. According to QoL V results, 44% of respondents with debt said they had missed a debt repayment in the three months before the interview (see Figure 2).
Figure 1: Do you have debt? (Source: QoL II (2011), QoL III (2013/14), QoL IV (2015/16) and QoL V (2017/18))
Although at least a quarter of respondents in recent QoL surveys said they owed money, debt is unevenly distributed across race, income and age groups and might not be an inherent burden for everyone. Figure 2 shows that respondents from households with lower incomes were less likely to have debt than respondents from households with higher incomes, but more likely to have missed a debt repayment in the three months before the interview. About 64% of respondents from households with an income of less than R1 600 per month have missed a debt repayment compared to 22% of respondents from households with an income of R51 201 and more per month. Poorer respondents are therefore more likely to be burdened by their debt. This debt burden may be compounded by additional costs, such as penalties and extra interests.
There is also an uneven distribution of the debt burden between age groups. For example, 18% of respondents aged between 18 and 24 years have debt, compared to 44% of respondents aged between 35 and 44 years and 27% of respondents aged more than 55 years. Depending on the nature of debt – that is, whether it is incurred either to acquire an asset or service that appreciates or to fund short-term consumption – people’s social mobility is likely to be affected at various points differently in their life cycle.
The QoL V survey results show some similarities in the proportion of African respondents (35%), coloured respondents (40%), Indian/Asian respondents (35%), and white respondents (38%) who had some form of debt. However, more African respondents (50%) had missed a debt repayment, compared to 37% of coloured, 22% of Indian/Asian, and 23% of white respondents. On average, African households in South Africa have the lowest average household income compared to other population groups (Statistics South Africa 2017) and therefore follow the pattern seen in the lower income bands in Figure 2.
Figure 2: Respondents who have debt and those who have missed a debt payment by income group (Source: QoL V (2017/18))
Map 1 and Map 2 show how debt is distributed across wards in Gauteng. Map 1 shows the proportion of respondents in each ward with debt. The proportion of respondents per ward with debt ranges from a minimum of 8.8% to a maximum of 70.9%. In wealthier wards in the northern suburbs of Johannesburg (around Bryanston), or the south-eastern suburbs of Tshwane (around Centurion), the proportion of respondents with debt typically exceeds 46%. However, it should be noted that there are a few poorer places where the proportion of respondents with debt reaches this level: Tsakane, for instance, a relatively poor township area near Springs, has 47% of respondents in debt. In some wards north of Vanderbijlpark, around Carletonville and in a township like Soweto less than 30% of respondents have debt.
Map 1: Do you have debt?
A contrasting picture emerges when respondents with debt were asked whether they had missed a debt repayment in the three months before the interview. Whilst there was a higher proportion of respondents with debt in the wards in the northern suburbs of Johannesburg (around Bryanston) and the south-eastern suburbs of Tshwane (around Centurion) in Map 1, these parts of the province have much lower proportions of respondents who had missed a debt repayment (as seen in Map 2). Meanwhile, areas such as Soshanguve, Mamelodi, Soweto and Ratanda near Heidelberg have higher proportions (more than 51%) of respondents with debt who had missed a debt repayment. In a township like Tsakane, it is evident that a high proportion of respondents have debt (47%) and a high proportion of them have missed a debt repayment (71%). While this pattern of debt burden is evident, we cannot infer from this analysis that residents in these areas will default if financial institutions offer loans to them.
Map 2: Have you missed a debt repayment in the last three months?
James, D., 2014. Money from nothing: Indebtedness and aspiration in South Africa. Palo Alto, California, United States: Stanford University Press.
National Debt Advisors. 2017. Debt guidance during the festive season. Available online at: https://nationaldebtadvisors.co.za/debt-guidance-festive-season/ (Accessed 19 November 2018).
Smit, C., 2015. How to avoid the festive season debt trap. Fin24, 22 December 2015. Available online at: https://www.fin24.com/Money/Debt/how-to-avoid-the-... (Accessed 19 November 2018).
Statistics South Africa, 2017. Living conditions of household in South Africa: An analysis of household expenditure and income data using the LCS 2014/2015. Available online at: http://www.statssa.gov.za/publications/P0310/P0310... (Accessed 21 November 2018).
(This article was revised slightly on 22 July 2019 to reflect some recalculations. In each case changes to figures originally provided were by no more than 1%).