Finance Minister Trevor Manuel has paid tribute to the Cape Town based non-governmental organisation You and Your Money — for trying to assist and provide guidance to people in severe debt.
Speaking at a fund-raising dinner hosted by the NGO on Wednesday night in Cape Town, Manuel said: ”Tonight we recognise and pay tribute to the hard work that the people at You and Your Money are doing to slacken the noose of debt that is choking too many South African families.
”Like all things in South Africa, talking about debt and sustainable development is not black and white.”
The minister said in the aggregate, debt levels in South Africa were not a cause of great alarm.
At a macro-economic level, household debt was a reasonable 55% of disposable income, Manuel said.
”This is up from just over 50% at the end of 2002. However, it has come down from the peak of over 61% at the end of 1997. When prime interest rates were increased to over 25% in 1998 the pressure of this burden on households was tremendous.”
Manuel said even more encouraging was the fact that overdue loans as a percentage of total loans in the banking system had fallen from around five percent in 2002 to three percent currently.
”Debt in and of itself is not a bad thing. It allows us to fund our ideas for the future. To leverage today’s productivity. And to borrow from tomorrow’s energy. Credit provides the essential fuel to smooth the dynamics of the economy. That said, this fuel can be explosive if not handled carefully.”
He said that things were improving, while both the aggregate numbers and the household information showed it — and households were generally managing their debt levels and general finances in a much more prudent way.
”As always, more can and must be done.
”I have stressed before and I stress again, meeting South Africa’s developmental challenges requires strong partnerships between government, business and civil society.”
Manuel said government could provide a regulatory framework to guide behaviour.
”But government is not ubiquitous. We cannot educate every household. We cannot oversee every loan granted or taken.
”Business and civil society must play an equal role in this chain to secure the financial foundation of our society.” – Sapa