The demand for consumer credit fell in the 3rd quarter of the year in South African households

As we take our first steps into 2021, we take these first weeks of the year to look back into 2020 and reflect on what the year has left for us to continue building on.

The pandemic that has hit the world for more than ten months will still affect us in many ways, health continuing to be the main touched sector. Moreover, the economic impact in countries all around the world is among the most visible consequences that were brought up in the last quarters of 2020. One way in which this was reflected in South Africa has to do with the confidence buyers showed when the time came to pay by credit in all its forms. Uncertainty led to a fall in the demand for credit and its consequent change in the way in which they are supplied.

When the Covid-19 pandemic began to spread over all territories around Earth, government administrations in each country assessed its impact in every area in order to make decisions to protect the sanitary system and slow down the number of infected people. As it is known, the decision of putting countries into national lockdowns was one of the most popular measures.

This in turn led to many changes, among them we can mention changes in the economic sector, educational systems, rates of employment and the way in which individual households began to administer their expenditures. This situation was dynamic and in constant change. Although the restrictions to economic activity placed by the South African government were loosened last December, these past weeks Alert Level 3 lockdown regulations were put back in place.

During the time the country remained in Alert Level 1, with less strict regulations, there were no changes in the way individuals behaved as regards their spending habits. The tendency was for citizens to reduce their expenditures in all matters, mainly in the ones which began to be considered as luxurious, like insurance policies and other services which did not cover basic-everyday needs. Right now, when the country is fiercely fighting the pandemic once again, mandatory protocols and regulations are renewed, and citizens continue to take special care of their individual economies.

South Africans are facing, once again, the urge to make important decisions as regards payments like, for instance, whether they are going into debt while paying by credit. In the country,  the credit options for acquiring everyday life supplies and paying household services are wide,  personal loans are one of these options, which become attractive when there is not a way for paying directly by cash.

The pandemic has impacted deeply on economies and this repercussion has been sustained during the time the regulations were sustained, and they will continue to do so. Besides the reduction of people choosing these ways of payment, there have been other out-turns. Due to a rising rate of unemployment, the number of delinquencies increased, finding individuals owing up to three payments. Recovery from these situations will be a slow process, it will take time until the economies of the world go back to their pre-pandemic status, having now to get used to ¨the new normal¨.

The current reconfiguration of society will require that administrations as well as citizens in each country accept and work to accommodate this reality. All in all, it is taking time for households to be back on their usual, pre-Covid-19 consumer spending habits. Individuals are cautious, they avoid, more than ever, reckless decisions as regards their economies under the uncertain circumstances the world is going through. The Covid-19 vaccine has brought hope to the sanitary systems around the world, common citizens’ trust on economic systems will depend on the results of the vaccine’s implementation and spread, and how administrations apply new restrictions and regulations.