Load shedding is negatively impacting the operations of the debt counselling industry as most member companies spoke with consumers telephonically, according to the National Debt Counsellors’ Association(NDCA).
In an interview with Personal Finance, Benay Sager, the chairperson of the organisation that represents some of the debt counsellors operating in South Africa said consumers preferred to speak to debt counsellors over the telephone, as opposed to face-to-face.
“It allows them an extra layer of confidentiality to be able to discuss their business telephonically; it’s been quite difficult in terms of that,” Sager said.
He said load shedding has impacted the industry from a payments and collections perspective. “We’ve seen regular outages with the payment systems, either with specific banks or with the whole system, due to consistent load shedding, which we’ve had during most of 2023. So that’s affected our ability to get hold of our consumers in terms of contactability and to have the right conversations, but also from a collections perspective.”
The NDCA said to mitigate the impact of load shedding, many of its members have invested in redundancy systems, be it batteries or generators, just as was the case for many small businesses. It said all this comes at a huge expense for all of them and their members, but it was necessary.
The organisation said last year was quite a difficult year, for both its members and their clients particularly because of the successive interest rate increases, as well as inflation and the fact that most people’s incomes had risen over the last several years. It said this has made it difficult for consumers to deal with their debt.
Sager said: “I think the lowlight is the difficult financial situation of the South African consumer, which affects all of us, and from that perspective, we’re hoping that 2024 will be a better year from all angles.
"We hope inflation will be easier to deal with, hopefully, interest rates will not increase; salaries will start to increase; and hopefully load shedding will subside a bit to give consumers a bit more breathing room.”
NCDA said that in the debt counselling industry, the impact of global events and regional events was never direct but always indirect and it generally took a long time to see the impact. For example, it said all the issues to do with inflation that consumers had been experiencing, already started in early 2022 with the Russia-Ukraine war and the squeezing out of wheat supplies, which impacted the whole global chain of things and resulted in oil prices and some wheat prices going up.
“That slowly found its way here and impacted the sector, eventually causing inflation which then in turn resulted in the Reserve Bank responding by increasing interest rates. Both have negative impacts on our consumers.”
Sager said the debt counselling industry did not feel the negative impact of the global events on the domestic economy immediately. “The lack of growth in terms of the creation of new jobs and increase of average salaries has impacted many of our clients, including us, in terms of our ability to help consumers. To mitigate that, we need the industry and the economy to grow.”
Sager said the industry has seen good growth in the last 12 months, and has increased its ability to continue to deliver value for South African consumers and creditors. He said consumers in this industry paid back more than a billion rand a month to their creditors, and they felt confident that that number would increase. “I think that’s really important for the economy because that money can be re-loaned to others, but it’s also important for consumers to feel like they’re winning. And I think we’re looking forward to continuing to do the same despite all the challenges we face in 2024.”
The NDCA said despite the challenging environment, it and its members expected continued growth because it believed it was in a good position to help South African consumers deal with their debt issues. “We’re expecting that it should be a positive year for the industry in 2024, but we are worried about the consumers’ ability to service their debt – and more importantly, to service their main financial obligations, because we’ve seen severe deterioration in that.”
For this reason, the organisation said the industry’s prospects were a bit mixed when you put all of those things together.
PERSONAL FINANCE