Middle class is buckling under debt: survey

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"Credit cards"

JOHANNESBURG - The middle class is under extreme financial pressure, judging by the latest Sanlam Benchmark Survey.

It shows that nearly half of the country’s middle class is unable to meet its debt obligations on time.

The report says consumers are buckling under their debt burden, with 7 in 10 people surveyed declaring that they were financially stressed.

The survey sampled more than 1,300 people, 60 percent of whom earn more than R300,000 a year.

"The primary reason for financial stress in our sample was short-term debt obligation," said the CEO of Sanlam Client Solutions, Avishal Seeth. "This would be short-term loan payments, credit card payments as well as car repayments. 

"South African’s middle class is struggling to keep up with its debt payments so, bearing in mind Africa’s middle class, we find that almost 50 percent of those interviewed were unable to meet their debt obligations consistently throughout the year. If we had to apply our definition credit rating to this group, we would find that almost 50 percent of South Africa’s middle class is currently funding for retirement while being in junk status."

The biggest culprit is short-term debt like car repayments, personal loans and credit cards.

READ: South Africans using credit cards to eat

According to the survey, this is not only having an impact on quality of life, it is also hurting productivity levels in the workplace.

Companies are urged to help debt-laden employees.

"Employers have the opportunity to have an impact on the financial wellness of their employees, not just because it is the right thing to do but because it makes business sense," said Seeth.

"The PWC 2017 Employee Wellness Survey found that there is a marked difference between employees who are financially stressed and employees who are finically well, in the sense that stressed employees are less productive than those who are financially well. Employers have the opportunity to influence their employee’s lives."

People are digging themselves deeper into financial trouble by borrowing money from friends and family to makes ends meet.

For many of them, the financial pain will continue as the country grapples with weak economic growth, high unemployment rates and rising household debt.

Sanlam says financial wellness has now reached dangerous levels, with 70 percent of survey % of respondents planning to reduce their standard of living when they retire.