There is an increase in the number of South Africans being sued for debt, however an analysis of the most recent statistics reveals that this increase is not as widespread as the statistics may initially indicate. Without Gauteng, the number of debt summonses in the other provinces is actually lower than in the same period last year.
For July, there were 30,248 debt summonses against private individuals, compared with 28,944 in the same period last year. When companies and other debtors are included, this total increases to 35,995, an increase of 2.9%.
This data would indicate increasing debt pressure on individuals in South Africa. This is not at all surprising, as the most recent increase in interest rates has caused the prime rate to rise to 10.75%. However, the data for specific provinces reveals a more accurate picture.
One province drives the increase
In July Gauteng had 12,280 debt summonses compared with 10,081 for the same period last year. This represents 2,199 more summonses in just one province.
For the country as a whole, the increase was only about 1,000 summonses. This means the increase in Gauteng was about twice the increase for the entire country. This also indicates the remaining eight provinces together had approximately 1,200 fewer summonses in July this year compared to the same period last year (a decrease of approximately 5%).
Over the last 12 months Gauteng’s proportion of the total number of debt summonses has increased from less than 29% to 34%. The Western Cape had the second most with 7,225 summonses, followed by KwaZulu-Natal with 5,245 summonses.
The statistics do not provide much further information as to why Gauteng is increasing so rapidly. There are many potential reasons, including a higher cost of housing and transportation, larger loan sizes, and a higher number of creditors and debt collection agencies in Gauteng. These reasons, however, are not distinguished in the statistics. What is clear from the statistics is that debt pressure is not uniformly spread, and a national average hides a province under greater stress than the rest of the country.
Sued does not equal judged
Another interesting aspect of the data concerns what happens once a summons has been issued. A debt summons indicates that a debt has been taken to court by a creditor. It does not, however, indicate that the court has ruled against the debtor.
The number of judgments against individuals has decreased while the number of summonses to individuals has increased. There were 8,464 judgments against individuals for the month of July compared with 8,814 in the same period last year. The total value of these judgments fell from R284.8 million to R269.6 million.
This equates to approximately 28 judgments out of every 100 summonses to individuals in July, compared with approximately 30 judgments out of every 100 summonses in the same period last year. This, however, is only an approximation, as Stats SA tallies court actions and not individuals, and a summons and a judgment in the same month are not necessarily associated with the same case.
With regards to provinces, Gauteng had the most summonses but recorded 2,259 judgments. This equates to about 18 judgments for every 100 summonses. The Western Cape had fewer summonses but more judgments, with 2,442 judgments made, or approximately 34 judgments for every 100 summonses. Whether this relates to faster judging in the Western Cape, different debt collection methods or more debtors in Gauteng settling their debts before judgment is unknown, however the difference is too great to ignore.
Gauteng also had the higher average value of judgments. Gauteng accounted for R97.8 million in judgments, averaging approximately R43,000 per judgment, compared to R94.3 million in the Western Cape, averaging approximately R38,600 per judgment. KwaZulu-Natal accounted for R51.1 million in judgments.
For any individual that has been sued on debt, the time between being sued and being judged is important. It is during this time that the debtor may respond to the summons, dispute the debt, negotiate with the creditor or seek advice. Ignoring a summons is what most often leads to a default judgment.
Not all debt is from banks
There is also the question of what category the debt falls into, and whether it is primarily debt from banks that ends up in court.
There was an increase in the number of debt summonses for money lent, from 6,946 in the same period last year to 7,632 in July. Of these, 7,098 were against individuals. The number of summonses for promissory notes, dishonoured cheques, credit cards or other acknowledgements of debt increased even more. There were 2,429 summonses in this category in the same period last year compared with 3,119 in July. This is an increase of approximately 28%.
The highest category, however, was “other debts”. There were 10,879 summonses for “other debts”. These include unpaid wages and salaries, property levies, university or school fees, tax and medical fund debt. Many of the individuals in court actually owe money to medical funds, schools and body corporates rather than to banks or other credit providers.
This category of debt was also the highest in terms of the total value of judgments. “Other debts” accounted for R98.5 million, or 28%, of the R352.1 million in judgments against all debtors in July. Money lent accounted for R83.1 million, promissory notes and similar acknowledgements of debt accounted for R66 million, and services accounted for R55.6 million.
A longer-term picture
Looking at a longer time frame, the trend is more apparent. From May to July there were 101,758 summonses compared with 97,898 in the same period last year. Judgments increased 7.6% to 31,076. The total value of these judgments increased 12.6% from R930.1 million to R1.047 billion (an increase of R117 million). The only category to decrease the value of the total was rent.
For July only, the total number of judgments against all debtors increased 3.1% to 10,732, while the total value of these judgments decreased 2.1% to R352.1 million.
This data is based on preliminary results from 203 magistrates’ offices, which also include small claims courts. These cover approximately 98% of all civil matters in South Africa.