Nedbank is reporting that it has seen a 10% increase in the number of consumers who are defaulting on payments, as they struggle to cope with rising rates, higher prices and a tough economy.

The bank reported total defaulted advances at R18.4 billion at the end of June, as retail consumers focused on more urgent items, while corporate customers also failed to pay their loans.

Strained consumers were showing defaults on home loans, vehicle loans and their credit cards, Nedbank said.

Typically, consumers are more indebted in the first quarter of the year – due to seasonal payments such as school fees and other costs – and things then improve later.

However the R18.4 billion in default advances is higher than the R16.7 billion recorded over the same period in 2015.

A troubled sector

Another big sign that consumers are in trouble is the massive 17% drop in new car sales seen in the latest data from the country’s vehicle industry.

This marks the biggest decline in the sector in 7 years in a sector that is considered one of the key indicators of consumer spending and financial health.

“This is the biggest sales decline since 2009, at the height of the global economic recession,” said Simphiwe Nghona, CEO of WesBank Motor Retail.

“Despite the Rand’s recent strength, what we’re experiencing now are the after effects of the currency’s weakness in months prior. This is compounded by distressed household budgets and low economic growth that is also trending downwards.”

WesBank’s data showed that the average new vehicle being financed in July 2016 was 14.6% more expensive than in July 2015.

Additionally, consumers who are unable to afford new vehicles are forced to hold onto their vehicles for longer. This period is up to 40 months for July 2016, compared to 38 months in July 2015.

High levels of consumer debt

South Africans currently owe R1.63-trillion to lenders, and are some of the most indebted consumers in the world.

According to Debt Rescue CEO Neil Roets, 9.9 million South Africans are highly indebted to the point where they are three months or more in arrears.

“This number is going to increase as interest rates and inflation rise while the economy slows,” Roets said.

Figures released by the National Credit Regulator and Statistics South Africa show that the majority of indebted consumers already owed 75% of their monthly pay to creditors.

“The fact that the government admitted that there would be a 0% growth rate was very bad news for the economy and would result in growing job losses and ever greater numbers of consumers in debt distress,” he said.