While prosperous and middle-class families in South Africa are under excessive pressure, other low-income earners, such as the thousands of domestic workers who rely on a source of income from personal domestic employment, continue to be the most affected.
That’s one of the findings of the most recent credit stress report for the first quarter of the year, compiled through customer analysis and the company Eighty20.
The organization noted that there are troubling trends among the low-income women’s organization it calls the “mothers of the nation. “Most of the 830,000 domestic workers employed in South Africa fall into this category.
Mothers of the Nation is a low-income segment where Americans earn around R1,000 per month, well below the minimum wage. It is the counterpart of the all-male segment “Hustling Males”.
According to Eighty20, any of the segments are typically unemployed or underemployed (presumably in a core occupation), and most receive government subsidies to survive.
The most recent unemployment figures from Stats SA show that domestic staff have fared poorly since Covid with around 200,000 fewer jobs than a few years ago. South Africa has had around 1 million domestic workers working, but that figure has dropped to about 250,000 employees as a result of Covid-19 lockdowns.
Despite some recovery, the number of domestic workers has still returned to pre-COVID levels. In the first quarter of this year, 67,000 domestic workers lost their jobs.
According to Eighty20, one explanation for why this may be just monetary pressure on the country’s middle and upper-class households, which is pushing them to reconsider domestic help.
“One for a homeowner under pressure to lose cash would be to blank their space and take care of their lawn themselves,” Eighty20 said.
The credit stress report showed that pressure on household incomes in South Africa is worsening, with even the wealthiest segments now seeing an accumulation of defaults.
While the relevance of other low-income people in terms of credit volume is negligible, the tension in those segments is clear.
Rural mothers and resourceful men account for only about 10 percent of the other thirteen million people combined who have some form of credit, and the total price of their loans accounts for about one-tenth of South Africa’s loan portfolio, Eighty20 noted. .
Despite this, the organization noted that “mothers” are under significant stress. The little debt they have, about 96% of the loan price for this segment are retail and unsecured loans, with new defaults of almost 50% for any of the products.
While loan balances on those two loans tend to be low, less than R2,000, only about 14% of the total price of non-government loans are in default each quarter, double the average retail default in South Africa.
This has also been in the recent financial statements of lenders serving those segments: both Capitec and African Bank have noticed increases in credit impairments as South Africans have noticed increased stress.
Capitec, with a visitor base of 20 million South Africans, noted that many more families, mainly in low-income segments, turned to loans to weather last year’s political and economic storms.
However, given emerging rates and limited income, they have not been to repay those loans.
African Bank its provisional effects this week that the same situation appears.
The Group’s credit impairment fees on loans and advances increased by 240% to R2240 million (1H22: R658 million) for the period, at a PCL ratio of 11. 1% (1H-22: 4. 8%).
The non-public banking department is the domain of concern, with the department’s PCL index peaking at 13. 6%.
The African Bank said retail consumers suffer the most from the poor economic climate due to high food costs and fuel inflation, affecting their ability to repay their debt.
Read: New legislation for domestic staff in South Africa: deadline for all employers this month
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