South Africans have gotten poorer after 34% drop out of the middle class

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South Africans have gotten poorer after 34% drop out of the middle class
South Africans have gotten poorer after 34% drop out of the middle class

Africa-PressSouth-Africa. Durban – As President Cyril Ramaphosa lifted the threshold for companies to produce their own electricity without a licence to 100MW, in an effort to kickstart a faltering economy battered by power cuts and the Covid-19 pandemic, a new study paints a grim picture of individual South Africans’ wealth.

A study by Transaction Capital has forecast that 34% of households in South Africa will fall out of the middle-class with debt being a major factor.

This has been compounded by the knock on effect the Covid-19 pandemic on South Africans’ income.

Citing credit statistics, wage data and unemployment figures from the period between October 1, 2020 to March 31, 2021, a recent study showed that overdue debt balances continue to increase, with a R33 billion increase seen in 2020.

Sebastien Alexanderson, chief executive of debt counselling company, National Debt Advisors (NDA), says the findings of the Transaction Capital study are extremely concerning, especially considering we are an already indebted nation with a dismal track record in terms of debt.

“According to Statistics South Africa, about half of South African families are considered poor, while about 30% are considered working to middle class. Furthermore, Transaction Capital’s research also stated that 34% of households in South Africa are forecast to fall out of the middle-class. This is further emphasised by wage data, which shows fewer South Africans have an income of over R22 000 a month – while significantly more have less than R8 000 a month.

“It seems that people living on the bare basics, and who were already experiencing hardships before the first lockdown of 2020, have been less affected than middle and upper class,” says Alexanderson.

If you were earning R6 000 a month and lockdown hit, but you were still earning and living off the same amount – then nothing much changed for you.

On the other hand, if you were earning R40 000 per month and your monthly living expenses and debt repayments totalled R35 000 per month, but your income was slashed to R25 000 per month, then you were – and remain – in trouble, Alexanderson noted.

Alexanderson also heads up Bamboo, a plant powered restaurant teamed up with NGO Breadline Africa last year during the height of the pandemic, to give healthy meals daily to those who could not afford them.

“We did this as a Bamboo project, because we knew there were so many people who were going hungry – but I saw so much of what we were experiencing at National Debt Advisors, reflected in our feeding schemes.

“Suddenly, it was not only the poorest of the poor who needed help – but middle- and upper-income families whose income had been affected, whether completely lost or cut,” Alexanderson says.

He said that many people accepted the payment holidays offered by banks, but this relief was just temporary – and the distress continued when things returned to normal.

“It isn’t a matter of income. How much you earn is only important in terms of how much you spend – and if your expenditure is consistently more than your income for months at a time, then you should consider getting professional help.”

Alexanderson says too often many people deny the reality of their situation and leave it until it’s too late to find any viable solutions.

IOL

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