By Thebe Mabanga
Johannesburg - South African consumer health improved in the first quarter of this year with payments on personal loans, credit card and cell phone contracts improving, although vehicle repayments deteriorated.
The Consumer Credit Index (CCI), released by credit bureau Trans Union on Wednesday, suggested that some consumers may have used extra cash freed up by lower inflation and fuel prices in the first quarter to improve their credit payment habits, but attributed the improvement largely to a tightening of lending criteria.
The index shows an improvement in loan repayment behaviour in the first quarter, with the number of accounts that are more than three months in arrears falling compared with a year ago. The index rose from 50.3 in the last quarter of last year to 54.6 in the first quarter of this year. The index stood at 49.5 a year ago.
The CCI is based on a 100-point scale, where 50 is the break-even level between improvement and deterioration of credit health. Any number greater than 50 shows an improvement in credit health.
Geoff Miller, CEO of Trans Union, said that while consumers enjoyed relief in the first quarter due to lower inflation and fuel prices, the sustainability of the relief is questionable as fuel prices have started to rise.
Miller added: “While the index shows the CCI rising further above the 50 mark, which is encouraging, factors such as loadshedding, labour disputes, a weak job market and an unstable rand are lurking risks to household financial improvement.”
The CCI measures aggregate consumer loan repayment records; tracks the use of revolving consumer credit facilities as an indicator of distressed borrowing; estimates household cash flow as a means of determining financial pressure or relief; and quantifies the relative cost of servicing outstanding debt.
“Trans Union data shows that repayment behaviour is improving fastest in the personal loan, credit card and telecommunication sectors,” the company said in a statement referring to cellphone contracts, adding that all these categories benefit “from more prudent lending practices after arguably excessively loose standards prior to 2014”. On a negative note vehicle impairments are up strongly by nearly 20% year-on-year, the Trans Union statement said.
The report showed that consumers used their higher disposable income to purchase goods in cash rather than taking more credit. Miller points that this is in line with retailers’ results, which have reported an increasing proportion of consumers paying cash.