Debt Balances Climb as South Africans Face Challenging Economic Conditions

  • Consumer appetite for credit remained high as lenders met demand with increases in new accounts opened across most product categories.
  • Delinquencies improved from the same period 12 months ago as consumers prioritised paying down debt faster.
  •  In the retail sector, consumers continued to shift away from cash purchases, as new business and balance growth were recorded for clothing and retail revolving facilities.

TransUnion (NYSE: TRU) today released the findings of its Q4 2022 South Africa Industry Insights Report. The latest analysis reveals that total outstanding balances and new account originations were higher year-over-year (YoY) across most consumer lending categories as consumers looked to access greater liquidity to finance increased cost of living expenses.

Against a backdrop of continued challenging macroeconomic conditions, with Gross Domestic Product (GDP) down 1.3% in Q4 2022 and with the Consumer Price Index (CPI) in December increasing by 7.2%1 over the prior year, consumer appetite for new credit cards continued to increase towards the end of 2022.

Card originations (a measure of both demand and supply) increased by 40.1% YoY in Q4 2022, showing growth for the sixth consecutive quarter. While lenders met this significantly higher demand, they remained cautious, with the average credit limit offered on new cards being 8.8% lower YoY. Gen Z consumers (born 1995 to 2010) accounted for 16.7% of new card originations in this quarter, up by 3.3% YoY.

Clothing account originations were boosted over the festive season and the back-to-school rush, with originations for these accounts during Q4 of 2022 surging by 59.6% YoY, pushing volumes above pre-pandemic levels. As volumes increased, the average new clothing account limit decreased by 9.0% YoY due to lenders taking a more cautious approach to growth, primarily with younger and riskier borrowers.

“This significant increase in clothing accounts also saw retailers experience a switch in payment mechanics, with credit rather than cash bookings contributing to an increased share of their growth,” said Weihan Sun, Director, Financial Services Research and Consulting at TransUnion Africa. “This is a clear sign that clothing accounts and other revolving credit facilities are the contributing factor to growth in the retail sector.”

The TransUnion report also showed that banks were originating higher value personal loans at increasing volumes, reflecting consumers’ need for liquidity. Bank personal loan growth continued, with origination volumes having increased by 4.8% YoY, while the average new loan amount increased by 8% YoY. Overall outstanding balances increased by 11.2% YoY, and average balances grew by 5.7%. Millennials (born 1980-1994) accounted for 50% of bank personal loan originations for Q4 of 2022.

Non-bank personal loan origination volumes increased by 24.7% YoY, with the average new loan amount having increased by 3.8% YoY. With the continued growth momentum from this latest quarter, new business volumes for this product are now back above pre-pandemic levels (7.3% higher than Q4 2019).

The home loan market remains resilient despite the high interest rate environment having affected consumer affordability, with home loan originations increasing by 8.3% YoY, and average new loan amounts having increased by 8.4%. Growth was driven primarily by the upper end of the market in Q4 2022, with significant growth in sales of properties valued at R3 million and above as buyers in this segment are generally less sensitive to rate hikes.

Vehicle loan originations decreased by 4.7% YoY, although average new loan amounts increased by 7.2% YoY, reflecting the combination of high interest rates and higher vehicle prices. New and used vehicle prices increased by 7% and 9.1% in Q4 of 2022, up from 2% and 7%, respectively, in Q4 of 2021, according to the TransUnion SA Vehicle Pricing Index (VPI). The VPI revealed that new vehicle purchases increased by 13.0% YoY during the quarter, while used passenger vehicle sales decreased by 3.4% YoY, likely due to a lack of quality stock as new vehicle sales were depressed over the prior two years.

Table 1: Q4 2022 Metrics for Major Consumer Credit Products


YoY % Change in Originations

Change in Originations Compared to Corresponding 2019 Pre-Pandemic Quarter(2)

YoY % Change in Total Outstanding Balances

Serious Account Delinquency Rate (3)

YoY Basis Points (bps) Change in Delinquency Rate

Credit card





-90 bps

Bank personal loans





-120 bps

Non-bank personal loans





-30 bps

Clothing accounts





-360 bps

Retail revolving





-140 bps

Retail instalment





-150 bps

Home loans





+50 bps

Vehicle finance





-220 bps

1 Originations for Q4 2022 compared to Q4 2021
2 Originations for Q4 2022 compared to Q4 for 2019 (comparable pre-pandemic quarter)
3 Account-level serious delinquency rate, measured as a percentage of accounts three more months in arrears


Lenders can use early warning signals to predict and prevent delinquencies

The current environment of rising interest rates and continued high inflation continues to contribute towards higher cost of living for South African consumers. The repo rate increased six times in 2022, resulting in a 325 basis points (bps) impact. Additional disruptions to macroeconomic recovery, such as the energy crisis and the conflict in Eastern Europe, all contributing to the continued inflationary pressure hindering debt affordability and serviceability for many consumers.

During Q4 of 2022, overall consumer-level serious delinquency (90 days or more past due) improved by 230 bps YoY to 38.5%. This improvement suggests consumers appear to be better managing their credit repayments, in order to preserve their continued access to the liquidity that credit products provide as they anticipate continued tough macroeconomic conditions.

While overall delinquency levels improved over the year, they remained above pre-pandemic levels of 38.3% (Q4 2019). Although consumers remain resilient, continued pressure fuelled by the uncertainty in the energy sector will likely be a source of discomfort for lenders, with many believing we are nearing a tipping point towards deteriorating performance.

“While efforts in portfolio management often focus on optimising collections after delinquency, enlightened lenders have the ability to identify and focus more on borrowers in pre-delinquency states at risk of becoming delinquent, to empower consumers and prepare less costly recovery strategies,” observed Sun. “Using a robust data framework to identify at-risk consumers at an early stage, and respond with appropriate account management strategies, can help prevent delinquencies and build loyalty among customers.”

To deliver the tools necessary for effective risk management, TransUnion conducted a study in 2022 to better understand first-time defaulting consumers, and clearly distinguish distracted consumers from struggling consumers.

TransUnion’s 2022 Early Warning Signals (EWS) study defined first-time defaulters (FTD) as consumers who have defaulted (became 30+ days past due on a credit payment) for the first time over the prior 24 months of their credit history, meaning they were current on all their credit payment obligations in the two years prior to their default. 

Among FTD consumers, the study identified distracted payment behaviour as a consumer missing a payment but for non-financial reasons, such as being away on vacation, moving to a new address and not receiving bills, or even a major life event such as having a baby. A distracted consumer is defined as a FTD that did not go any deeper into delinquency over the subsequent periods, whereas a struggling consumer rolled into more severe delinquency stage over the next six months. 

In contrast, struggling payment behaviour is defined as FTD consumers who subsequently rolls into a more serious delinquency stage (e.g., progressing from 30 to 60 days past due). Struggling consumers likely miss payments due to economic difficulties such as losing a job, a slowdown in a business owned by the consumer, or having other financial obligations during a time of financial pressure.

The study, conducted using credit data between April 2019 and June 2022, found that younger, higher risk consumers with lower incomes and less credit experience have a higher probability of becoming struggling consumers. However, a portion of lower risk borrowers with prime* and above credit scores were also found to be struggling, making it key for lenders to identify them.

The study also found that consumers building balances over a short period are more likely to default, making this behaviour a leading indicator of delinquent and struggling consumers. A high utilisation rate is also a good indicator for predicting struggling consumers, who also tend to have less mature portfolios, with a higher share of accounts opened in the last two years. In addition, the study found that consumers who pay above the minimum payment due amount are less likely to become delinquent and struggling.

Leveraging enhanced credit attributes, the EWS model predicts the likelihood of a FTD rolling into more serious delinquency on their payments in the following six months. The TransUnion model can accurately predict 54% of struggling FTD consumers in the top two deciles of all borrowers. Of FTDs, 65% tend to be struggling consumers who do not financially recover on their own, implying that lenders need to employ proactive collection strategies.

For example, as of Q3 2021, 5.9 million credit card consumers in South Africa had not defaulted for the previous 24 months. By applying TransUnion CreditVision® scores, 12% of those consumers were assessed to be higher risk, with below prime* credit scores. By applying EWS scores, 36% of those higher risk consumers, with a total credit limit of R8 billion, were predicted to be struggling. Interestingly, 3% of credit card consumers who appeared to be less risky (prime and above credit scores) were also identified to be FTDs and struggling.

“Lenders can identify struggling consumers before they become delinquent for the first time, and control losses by layering an EWS model over traditional and enhanced credit scores,” Sun said. “This will enable them to identify and mitigate credit risk earlier, which is essential for reducing credit losses and the effort and costs associated with late-stage collections”.

Note to editor:
* Scores are based on TransUnion’s CreditVision generic scoring methodology. Risk distribution key: subprime (0-625), near prime (626-655), prime (656-695), prime plus (696-720), super prime (721-999).