To some extent, I think we are beginning to see greater caution on the side of consumers to take on new debt. The fact that the retail industry as a whole showed flat earnings this year, compared to the same period last year and that two of the largest furniture retailers are going through rough times is evidence of this.
With African Bank under curatorship and desperately trying to get rid of furniture retailer Ellerines, which is now under business rescue and Lewis Stores reporting 'extremely challenging' trading conditions, it would seem that consumers have become more cautious about spending and taking on new debt.
Unsecured loans are also going to become more difficult to come by because South Africa's largest credit provider in this sector, African Bank Limited (ABIL), now under curatorship, will almost certainly become more cautious about extending credit to consumers who cannot prove that they are creditworthy.
We have also come across an interesting urban myth among deeply indebted consumers that they will not have to repay their outstanding loans to ABIL because they believe the bank has gone out of business. Obviously, this is not the case and, if anything, whoever takes over the loan book of the bank will probably be more aggressive in trying to collect outstanding debts before they prescribe.
The overall situation for consumers remained "dire" which is evidenced by the huge increase in the number of people who have reached the end of their tether and have had to seek protection from their creditors by going under debt review. By going under debt review, deeply indebted consumers are able to repay their debts over an extended period without having their homes or other belongings attached by credit providers.
