Jonathan Hurvitz, Teljoy Group CEO
Is it really accurate to say “New Year’s Resolutions” if there’s no mention of intentions along the lines of “save more money”, “spend less on takeaway food” or “calculate and stick to a monthly budget”? Easy enough in the first month of the year, when we’re all still feeling fresh, energised and inspired to live our best lives.
Seriously though, South Africans are deeply in debt. According to Reserve Bank data, household debt is close to 73% of gross income. If avoiding debt was easy, then the 73% would likely be closer to 7%.
One of the most pressing reasons is that South Africa is such a financially stressed country, with official unemployment sitting at a staggering 31.8% and further exacerbated by the fact that we’re one of the most economically unequal societies in the world. While contemporary culture is dominated by messages about materialism we have the highest rate of wealth inequality in the world.
In a survey released by PayCurve in August, a startling 80% of respondents indicated they often have to take expensive short-term loans in order to cover basic expenses. So it comes as no surprise that 70% said they have to lay aside a greater percentage of their monthly income towards paying off short-term debt.
This is clearly unsustainable but begs the question, Where to next?
Rise of the rental
All around the world, the concept of the rental economy is gaining traction as more consumers opt to rent big-ticket items like furniture, appliances and electronics, rather than buying them on hire purchase, taking out a loan or using their credit card budget accounts. This enables them to rent what they need on a month-to-month basis with the option to take ownership of the item after a specified period.
Clothing retailers and fashion houses are even renting clothing out for special occasions rather than allowing their clients the option of blowing their budget on outfits they’ll probably only wear once or twice.
Rooted in the shared economy, characterised by Airbnb and Uber, one of the hottest global trends at the moment is renting and renting-to-own. This is a transactional system that offers access over ownership and provides a lot more flexibility, especially as contracts can be upgraded, downgraded or cancelled at any time. Very importantly, this approach removes the risk of floundering under steep debt.
International brands like Ikea, Banana Republic and H&M are now offering items as diverse as fridges, furniture and fashion as a rental service, allowing consumers to rent what they need, until they no longer need it, or to purchase the item after a specified rental period. Unsurprisingly, this is a trend that is catching on in South Africa, with providers like Teljoy offering a range of white goods, furniture and electronics on a rent-to-own basis.
Access over ownership
In some cases, it makes better sense to rent consumer items rather than buying them. When household appliances, electronics or even items of furniture break, the only option typically available to consumers is to purchase a brand new item, often on credit or through a costly hire-purchase instalment plan. With rent-to-own, the burden of fixing or replacing the item is on the provider and not on the consumer. The consumer continues to enjoy access to the product, without the risk and responsibility that comes with ownership.
What’s more, increasingly more people value access to an item versus the ownership thereof, as the latter is perceived to be burdensome. Our attitudes, preferences and way of life in the 2020s are simply no longer compatible with an old-school mindset when it comes to acquiring items.