Reality bites after spending splurge


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By Cate Rayner

Payday is still weeks away for consumers, who are turning to pawnbrokers or borrowing money at high interest rates.

South Africans who went on a spending splurge over the holiday season are now buckling under debt and many are expected to turn to debt counsellors this month as the post-Christmas bills start arriving.

Two debt counselling firms have warned of the financial stress that lies ahead, while pawn brokers report brisk business in recent weeks.

“Reckless Christmas spending will cause serious financial stress in the weeks to come and consumers need to start formulating their strategy now,” said Luke Hirst, the managing director of Debtbusters. He urged people to seek help immediately rather than ignore a perilous financial situation, as this could prevent them from obtaining loans in the future.

Paul Slot, of debt counselling firm Octogen, said: “Although the recession has technically ended for consumers and businesses in South Africa, this does not mean that all is well.”

Slot says that many consumers may be feeling vulnerable at the start of the new year after a December spending spree and may be looking around to borrow as they will simply not make it through to their January payday.

“This should be a last resort and, if essential, should be done with full consideration of all consequences.”

They should ask themselves if the need was compelling. Those who were already overborrowed should not take on new debt.

A surprising number of households were also turning to pawn shops for quick cash.

Robin Coetzee, of Waterfall Pawnbrokers, says: “Last January and February I saw a dramatic increase in pawn transactions compared to the same period in previous years. I have no doubt the same will happen again this year.”

Another trend indicating there is a shortage of ready cash is the number of customers who return to claim pawned goods.

“In the past, 60 percent of our customers would come back, but over the last year this has dropped to 30 percent.”

Roshan Sewnarain, owner of Roshco Pawnbrokers and Enterprises in Chatsworth, has seen an increase in sales of second-hand goods.

“I have sold more tools and DIY equipment over the past few months than ever before. I cannot keep up with the demand,” says Roshan.

“Because money is tight, consumers are looking at ways to save where possible. What better way to cut down on expenses than trying to fix and repair things yourself?”

Sindy Miller, the owner of Gold & Finance on the Berea, has also seen a recent increase in people using their jewellery to obtain quick finance.

“We are normally closed over December. In 2009, for the first time ever, we stayed open to cope with the increased demand for our services. The sentimental value and attachment to jewellery often means that people do not want to sell it.”

Richard Mukheibir, the managing director of Cash Converters, said there had been a significant increase in retail sales in the past year, with turnover rising more than 20 percent from the previous year. “The reason for this is the significant upturn in purchases through people getting rid of unwanted equipment to make extra money.

“Even though people are having a tough time, they still have a desire for cellular phones and electronic equipment, which we sell with guarantees, and people are happy to do business with us.”

This article was originally published on page 9 of The Sunday Tribune on January 10, 2010

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