To say South Africans have a debt problem is an understatement. With consumer debt now sitting at a staggering R1.5 trillion, according to the latest data from Experian South Africa, it is certainly a cause for concern – not that this is a new trend. Consumers have been under the strain of debt for some time, partly due to slow economic growth, most recently compounded by job losses, reduced salary scales, or delayed TERS payments, among others, due to Covid-19.

According to the TransUnion Q1 2020 South Africa Industry Insights Report, “outstanding balances continued to grow across all major consumer lending categories”. In fact, total outstanding credit card debt increased by 8.4% year-on-year (YOY), and that of non-bank personal loans by 17.2% YOY. 

In addition to the regular quarterly report, TransUnion also researched the predicted impact of the Covid-19  pandemic on the consumer credit market. On the back of already challenging economic conditions prior to lockdown, they noted that the pandemic could be expected to impact significantly “on the nation’s personal finances in the months, and even years, to come”. 

“In the current economy, there is no denying that consumers are taking great strain. Adding to debt now will only make things harder in the long term. But that doesn’t change the fact that expenses do come up, whether planned or not,” says Teljoy Sales and Marketing Manager Aimee Miller, adding that, while the buying of expensive items outright on high-interest credit options is a solution, it is risky in the current context. 

The current reality means that consumers are forced to transition from ‘living their best lives’, often funded by credit spend, to survival mode. In a new world where income is severely strained, and expenses are piling up, it begs the question, Where to next? What are the alternatives available to consumers to ease the financial burden in the immediate to long term? 

When household furniture, electronics or appliances, for example, decide to give up for good, it is generally unexpected and replacements are typically then paid for by adding the full purchase to a credit card, or through a costly hire-purchase installment plan.

Miller questions why this is the case when it’s common practice to purchase homes, vehicles or even cellphones on a contract, paying these off over time until they’re owned outright.

She says that rent-to-own, a consumer model in which Teljoy specialises, offers exactly that alternative. A range of household items can be purchased on a month-to-month contract with the option to take ownership after the predetermined rental period. This offers flexibility, she adds, and the contract can be upgraded, downgraded or cancelled at any time. Maintenance and risk cover also protects consumers should items need to be repaired or replaced. 

The rental goods economy has already taken off in wealthier countries such as the United States, where market research company Lab 42 has noted that there has been a significant shift towards renting items such as furniture, clothing, technology, jewellery, tools, and more. The number-one consumer choice for rental is furniture, for reasons such as temporary housing, expensive upfront costs, hosting events in the home, or even just to test it out. With the rise in demand, the study notes that more companies are incorporating rental options into their business offerings. 

“In the current circumstances, rent-to-own offers a more affordable and safe alternative, without a long-term commitment at a time when the future is uncertain,” Miller says.