The financial vulnerability of consumers worsened during the third quarter of the year, according to the results of the latest Consumer Financial Vulnerability Index (CFVI) released on Tuesday.

The survey results found that the recession in South Africa had given rise to increasing levels of vulnerability in the third quarter and that this was likely to continue to increase for the rest of 2009.

"Job losses, high levels of indebtedness and severe poverty continued to negatively affect the financial situation of South Africans during the period under review," the survey indicated.

The overall CFVI and sub-indices are based on a ten-point scale where 0 indicates total financial security and 10 indicates total financial vulnerability.

The overall index increased from 5.17 in the second quarter of 2009 to 5.49 in the third quarter.

Number of defaults on payments mount

"It is evident that South Africans are at risk and becoming more at risk as the number of retrenchments and defaults on payments mount," said the authors of the survey, Finmark and the Bureau of Market Research.

"Looking at the different components of financial vulnerability, these scores show that savings vulnerability, debt servicing vulnerability, income vulnerability and the overall CFV index increased in the third quarter of 2009, while expenditure vulnerability, which reflects consumers' ability to live within their means, declined," the authors said.

Survey participants were asked to identify the biggest problems consumers were having.

Accounts handed to debt collectors

They listed not being able to maintain payments on their financial obligations; being in arrears for three months or more; and their accounts being handed over for debt collection, as some of the biggest problems.

Consumers also identified making debt repayment arrangements; and an increasing number of consumers not being creditworthy, as problems.

Survey participants were asked to provide reasons for the bad financial situations of consumers.

The main reasons given were job losses; low income; loss of income due to the death of an income earner; unforeseen necessary expenses; not having sufficient savings to draw on; not receiving a cash income; and bad financial planning.

Sapa

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