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Millions of South Africans are Still Struggling with Debt… Are You?



This article was first published in September 2013 – and unfortunately not much has improved or changed 
Don’t get bullied into a compromising position with regards to any type of debt. There are solutions, but you need to deal with debt head on.

Durban – When Jack Naidoo upgraded his vehicle three years ago, then took out a loan to renovate his Chatsworth home, his budget calculations at the time revealed that he would have money to spare and a little to save.

However, within months the municipal rates for his property increased, followed by hikes to electricity and water. These increases quickly cut into that “safety cushion” he believed he had.

“Then we had all those petrol increases, and before I knew it I was applying for a credit card and store card to help fill the gap. But after a few months, the 21 percent interest rates they whacked me with put me further and further into debt – to the point now that it will take at least six years to get out of” he said.

Naidoo is among the millions of South African consumers facing the strain of rising food and fuel costs who are turning to credit to survive.

Figures from the National Credit Regulator (NCR) Credit Bureau Monitor show that more than 9.5 million consumers had impaired records as they had fallen behind on credit repayments.

Credit Bureau Monitor figures are often used to gauge the level of individual debt in South Africa.

“Impaired records” refers to a consumer or account that is three or more payments or months in arrears, or has been handed over or written off, or against which a judgment or administration order has been granted.

The NCR Credit Bureau Monitor for the first quarter of this year shows that consumers with impaired records increased by 189 000 people, while the number of credit accounts reached 70.73 million.

In turn, the easy lure of credit is driving many consumers to the brink of financial ruin.

Magauta Mphahlele, chief executive of the National Debt Mediation Association, said most consumers who approached them had debt exceeding their income by more than 30 percent.

She said many people were granted debt beyond what they could repay, while others incurred excess debt by not fully disclosing their financial positions.

Other factors were consumers taking the maximum amount offered when the plan was to taken up a lesser amount.

“These additional funds are then consumed by general day-to-day expenses. Some consumers do live beyond their means due to peer pressure, social acceptance and family expectations,” she said.

Mphahlele said consumers should learn to live within their means by budgeting and knowing how much they spend every month.

“Consumers should ensure that debt is used for needs and not ‘wants’, and when they do take credit they must understand the interest and fees payable for the full duration of the period for the credit you take.

“When deciding whether you can afford to take on new credit, factor in interest rate hikes, maintenance costs – homes and vehicles – and cost-of-living increases,” she said.

Manie van Schalkwyk, the Credit Ombudsman, said many consumers had been placed under further strain by credit providers who deducted repayments from consumers through garnishee orders, which had been abused to an extent where people were charged more than they owed and, in some instances, were left with only 20 percent of their salaries.


 Worried couple doing their accounts in the living room“One of the abuses we found was that consumers were forced into signing consent to judgments,” Van Schalkwyk said. “This is illegal and nobody should ever have to sign this, as the credit providers go to court with this contract which allows them to obtain attachment orders.”

Van Schalkwyk said if consumers got into debt, they should approach their credit provider and make arrangements to pay off their loans.

“If you get into trouble, don’t be like an ostrich and hide. Rather confront the problem and find a way to settle the debt,” he said.

Bernadene de Clercq, head of Unisa’s personal finance research unit, said that while many people were awash with debt, the situation was not as dire as it was made out to be.

“We need to understand the numbers. A lot of consumers in fact don’t have any debt at all”.

“If you take the figure of the NCR, which says that 47 percent of consumers have impaired records, it is important to understand that if you have 10 accounts and if you are in arrears for only one of those accounts, yet are up to date with the rest, you will be classified as being in arrears.

“There is also an issue of how debt is measured. It is important that we have a more critical look at the numbers that are being reported and have a better picture.

“Not all consumers are stressed. There are some who are struggling, but we don’t think that is as acute as it is made out to be,” she said.

Source: Daily News

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Financial Emigration – What it is and does it apply to me?



Simply put, financial emigration is the amendment of your status with the South African Reserve Bank (SARB) from “Resident” to “Non-resident”.

This status effects on how the exchange control regulations are applied to you but does not affect your citizenship. Until you formally financially emigrate you are still considered to be a “Resident”. This has resulted in many people, having left South Africa for other countries many years ago, still being considered as a Resident by the SARB because they have not completed the formal process of financially emigrating.

There has been much consternation since an amendment to the Income Tax Act was proposed in 2017 regarding the exemption of foreign income for calculating income tax. As this amendment
came into effect on 1 March 2020 the interest surrounding this amendment has increased fairly dramatically in the run up to the change.

At issue is the application of Section 10 (1)(o)(ii) of the Income Tax Act and the determination of where the taxpayer is considered to be resident – on 1 January 2001 South Africa changed the basis of its tax system from sourced to residence based.

Current Position

Section 10 (1)(o)(ii) provides that a South African tax resident’s employment income that relates to services physically rendered outside of South Africa is exempt from tax, providing that individual is rendering services for or on behalf of their employer outside South Africa:

  • For a period exceeding 183 full calendar days, in aggregate, during any 12-month period (commencing or ending during a year of assessment) and
  •  In the same 12-month period, must be outside South Africa for a continuous period exceeding 60 full calendar days.

Where the above situation applies to an individual, all remuneration earned in relation to the foreign employment will be exempt.

This situation applies to many “ex-pat” South Africans who are currently working abroad.

The original intention of this exemption was to avoid double taxation on this income. SARS; however, has stated that while this was the intention, it was not meant to provide a mechanism
through which South Africans could avoid paying tax i.e. where work is performed in countries that have zero or low tax rates.

To prevent this SARS has amended Section 10 (1)(o)(ii).

Future Application

The initial amendment was to limit the amount of exempt income to R1 million but in the budget speech on 26 February 2020 this amount was increased to R1.25 million.

When determining this foreign income, the taxpayer must include the value all benefits received as part of their foreign employment such as accommodation, flights back to South Africa or elsewhere,school fees etc. In this scenario it is conceivable that the foreign income could fairly easily exceed the R1.25 million threshold.

Any amounts in excess the R1.25 million threshold would be subject to income tax in South Africa.


Affected South Africans may still avoid having to pay South African income tax if

  • There is a Double Taxation Agreement (DTA) in the foreign country where they employed to provide services which applies or
  • They can claim a foreign tax credit in respect of taxes paid in the foreign country on their foreign sourced income now subject to income tax in South Africa (this may not help South
    Africans in no or low tax jurisdictions such as Dubai).

Financial Emigration

While applying a DTA may be an option, the application of the DTA only applies for a particular tax year. This then requires the taxpayer to make a separate application every year – a potentially costly and time-consuming exercise.

The process of financial emigration, whilst more onerous, is a longer-term solution. If required, this status may be reversed at a future time but there are implications if this is this is done with 5 years of the SARB approving the emigration.

While Financial Emigration is an option for individuals who do not intend to return to South Africa, there are costs involved with the process. It is recommended that you speak to a Tax Practitioner regarding the implications of financial emigration to establish if this is the preferred option for you.

Written by: Derek Pettitt, Tax Practitioner and Registered Financial Planner

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Saving for your child’s education




A parent wants to ensure the best future for their child. One of the best ways to give your child a head start in life is to help them get quality education.

A lot of South Africans. However, are not saving up for their child’s education. This is mainly due to the challenging economic situation in our country and living expenses. The cost of education rises faster than inflation unfortunately. If education seems expensive now, in the future, it will be even harder to cover all the costs.

If you have or are going to have a child soon, here are a few tips for saving for your child’s education:

1. Start Now

Start saving for your child’s education as soon as possible- if you can, before your child is born. The sooner you start saving, the faster your money will grow and the less you must save monthly.

2. Consider taking ownership of the investment

While it may seem like a good idea to invest money in your child’s name, you may want to keep it in your own name. If the money is in their name, once your child turns 18, they can spend the money however they want- and they may not have their priorities set on education at that stage of their life.

3. Do your homework when it comes to fees

Although private education in South Africa is excellent, the cost to send your child to a prestigious school can be crippling. Decide early on what type of school you’re going to send your child so that you can save accordingly. Remember a goal without a plan is just a wish.

4. Find the best method to pay for fees

Some schools offer a discount if fees are paid upfront for the year instead of monthly or quarterly. This may be a good offer to take up if the discount is a significant amount. On the other hand, you may want to consider whether you should rather invest the money and pay the school fees in monthly instalments. Often, debt is the deciding factor for parents. If you must take out short-term debt, such as credit card and retail card debt, it may cost you more than the rebates offered by the school. There is no such thing as good debt though.

In conclusion start now and have a set plan. Our kids are our future leaders and you want the best for their future.

Written by: Andre Becker, Ubuntu Capital Momentum Financial Planner

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How can a Financial Planner help me?




When you are sick you go to a doctor right? When your plumbing acts up you call a plumber right? Who would you call then if you need help with your Finances? A financial planner, right?

And here’s why:

Do you need the services of a financial planner?

How do you know if you could benefit from the services of a financial planner?

You may not have the expertise, the time or the desire to actively plan and manage certain financial aspects of your life. You may want help getting started. You may benefit from an objective, third-party perspective on what are often emotional and difficult decisions. And in today’s hectic world, it can be beneficial just to have a financial expert looking over your shoulder to double-check your planning efforts and make sure you stay focused and follow through with your financial plans.

Like most people, you have hopes and dreams and life goals for yourself and your family. These might include buying a home or business…planning for life’s unforeseen events…estate planning…saving for an education for your children…taking a dream vacation…reducing taxes…retiring comfortably. Financial planning is the process of wisely managing your finances so that you can achieve
your dreams and goals, while at the same time helping you negotiate the financial barriers that inevitably arise in every stage of life.

I again ask the question; do you need a financial planner?

A Financial planner can help you do the following:

  • Set realistic financial and personal goals (to become financially and personally organised)
  • Set up a valid executable Will, living Will and medical power of attorney
  • Assess your current financial health by examining your assets, liabilities, income, insurance, investments and estate plan
  • Develop a realistic, comprehensive plan to meet your financial goals by addressing financial weaknesses and building on financial strengths
  • Plan for life’s unforeseen events and be ready should they occur (Life cover, Funeral cover etc)
  • Put your plan into action and monitor its progress
  • Help you stay on track so you can meet your financial goals
  • Saving enough for retirement, or rolling over a pension or just saving for a specific goal
  • Handling the inheritance of a large sum of money (easy come easy go). Unless its managed properly
  • Preparing for a marriage or divorce
  • Planning for the birth or adoption of a child
  • Facing a financial crisis such as a serious illness (Critical illness and Disability cover)
  • Caring for aging parents or a disabled child
  • Coping financially with the death of a spouse or close family member
  • Funding education
  • Buying, selling or passing on a family business
  • Protecting a key person valuable to your business

In essence making sure should life unexpected events occur that you are READY to take them head on.

Written by: Andre Becker, Ubuntu Capital Momentum Financial Planner

Get in touch with Andre by filling out the below form:

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