Rising household debt leading to increased workplace fraud
Rising household debt is leading to increasing workplace fraud.
Household debt has risen to 77,6% of disposable income (from 47% in 2003), while rising interest rates have boosted debt service costs to 10,9% of disposable income, their highest level since 1999 according to the South African Reserve Bank.
The National Credit Regulator (NCR) says the number of South African consumers with good credit standing dropped from 10,67- million in last year's June quarter to 10,52-million in the September quarter as consumer indebtedness ballooned to R1-trillion. It said 50,98-million accounts were listed at credit bureaus in September 2007 from 51,52-million in June, but accounts in good standing declined from 79,2% to 78,5%.
South African police officials and private investigators contracted to corporates say this is leading to higher levels of fraud in the workplace. “The concern is that with another percentage interest rate hike expected in June, more and more heavily indebted people will struggle to retain houses, cars and those markers of excess they invested in before the National Credit Act began curbing over-spending,” Liza van Wyk, CEO of BizTech said.
BizTech, a major training organisation, received persistent requests from clients, most of which are blue-chip companies and parastatals to introduce a course to help staff know how to resist keeping up with the Joneses and to stay within their earnings. Practical Personal Finance: Take Control Back! is the new course which debuts next month.
“We’ve had an amazing response to it,” Van Wyk says. “Many companies would rather fire fraudsters than lay criminal charges against them so a considerable amount of white-collar crime stays out of the public eye. Banks, as an example, are frightened that investors may fear the security of their deposits if the public knew of criminal activity among their staff.
“Restaurants would rather release a corrupt waiter than reveal they had a credit card skimmer working for them. But there is another lay of problems that do not relate to crime. We have become a society desperate for all the trappings of success without accepting the responsibilities that go with it. Some clients have complained that staff will pay thousands for a pair of shoes and then not have enough taxi-fare mid-month to get to work. One large organisation discovered a well paid staff member delayed her child’s first year at school because she had over-spent.
“Very often, the very act of sensitizing people to how much they lose when they overspend and how much they could gain by sound investments can make the difference.”
BizTech facilitator Dirk van Roggen who helped design the course said the course explains different types of income and expenditure, he helps course attendees learn how to read a simple income statement, a balance sheet, discuss different types of investments and learn how to effectively budget.
“Living within your means is not spending more than you earn,” he says. “The importance of managing your accounts well ensures that you have a good credit reference. Banks will want to deal with you, you will be able to get better interest rates and have a better shot at achieving wealth. It also shows that you are a trustworthy and dependable individual.”
The BizTech course gives some tips to get your personal finances into platinum shape:
• Never invest in a policy for longer than five years
• Pay off a little extra on your bond each month
• Always pay yourself first eg set aside money to buy food, pay for transport and other essentials
• Calculate the difference between what you have put in your pension fund and what it is worth today
• Have a positive relationship with your banker
• Use bank money in a property, not your own, ensure you have an access bond.
In 2006, mortgage advances accounted for R403 billion or 59.0% of total household debt. Higher interest rates will deter home buyers and make it more difficult to repay loans.
House price inflation has not been affected yet by the interest rate rise, with prices rising by 10.4% year-on-year in July 2007, according to a national bank. But analysts are concerned that a crisis similar to the one unfolding in the USA in the sub-prime mortgage market could happen in South Africa.
Investing in bonds always creates more money. For example, putting R335 per month in a policy at 4,5% a year will give you back R21 004 in five years – but the same amount into a bond at an 11% interest rate per annum will result in a savings of R216 342 in five years – a difference of R195 338.
But too, never spending more than you earn also pays huge dividends over the long term. Altron chairman, Bill Venter who started his mega-corporation in the early 1960s after selling his wife’s car, has never used credit and doesn’t believe in spending more than he earns – last month his corporation, which now employs 15 000 people, recorded a bumper income of R22-billion.“When people get into deepening debt they sometimes lose focus and will try anything to get money quickly, actually the simple acts of daily discipline necessary to build wealth are a far surer path to financial stability and ultimately wealth,” Van Wyk says.
• Practical Personal Finance: Take Control Back! Runs from 18 to 19 June at the AstroTech conference centre in Parktown, Johannesburg email:firstname.lastname@example.org
FOR FURTHER INFORMATION CONTACT:
LIZA VAN WYK, CEO BIZTECH 0861 249 832 or email@example.com www.biztech.co.za
Issued by MediaOnLine firstname.lastname@example.org 011 646 7637