Consumer Indebtedness Among Urban South African Households: A Descriptive Overview

This working paper analyses consumer indebtedness among urban South African households. The theoretical basis of the topic lies within consumption theory, and the empirical exercises are conducted on Part Two of the October Household Survey – the Income and Expenditure Survey (Statistics South Africa, 1995) and an adjusted 1999 dataset constructed by Wefa Southern Africa. The primary objective of the paper is to provide a descriptive overview of urban household indebtedness; consequently, we are concerned only with the basic relationships of consumer theory, namely the composition of income and consumption. The results indicate that (1) at the national level, indebtedness trends upwards as income increases while cashflow trends towards a decrease as income increases; (2) there are predictable, Engel’s law consumption patterns amongst the poor and the rich; (3) the composition and sources of debt vary widely between the poor and the rich; (4) between 1995 and 1999, household indebtedness generally increased while household cashflow generally decreased; also, important substitution shifts took place in the consumption schedule, with a greater proportion of income being spend on housing and food.