Kea' Modimoeng

Kea' Modimoeng

South Africans are incapable of tightening their belts because they lack financial skills - and they are too materialistic.

This is the view of Thami Bolani, chairman of the National Consumer Forum.

He said: "The majority of South Africans lack financial literacy skills and this is displayed by their continuous drive of living beyond their means.

"Another problem is that consumers are just becoming too materialistic and they try to attain their materialistic goals at all costs."

Not only are low-income earners overly indebted, but also people with executive salaries.

"People are highly indebted simply because they are ignorant towards the burden of debt and to the importance of living within one's affordability," said Dr Eddie Stoop of the Elite Group, a player in the micro finance industry.

Luke Doig, an economist at Credit Guarantee, said consumers had been building up debt at a rapid rate in recent years "especially through property and vehicle financing.

"The other issue we have to consider is that it was very easy for people to get credit in the past, prior to the introduction of the National Credit Act," said Doig.

Now that banks have tightened their lending criteria, consumers were moving more towards macro lenders, said Stoop.

"As a country going forward, our focus should be on financial literacy and general consumer education," said Bolani.