High household debt a concern
7 May 2009
South Africa's high levels of household debt pose a potential threat to the country's financial system, the SA Reserve Bank says in its latest Financial Stability Report.
"The growth rates of household financial assets and net wealth have been falling gradually, and started contracting in the third and fourth quarters of 2008," the Bank said in its report on Wednesday.
According to the central bank, this could suggest that households might be liquidating part of their financial assets to reduce their debt during a period of financial strain.
According to the report, data from South Africa's credit bureaux show that the number of consumers with impaired credit records increased to 7.3-million in December 2008 from 7.1-million in September.
"The indebtedness of the household sector represents a potential channel of contagion through which an external shock [could] affect the financial system," the report states.
"Such a shock [could] take the form of a sharper or more prolonged slowdown in the economy."
Sapa
