FURNITURE retailer JD Group on Monday sharply increased the amount of money it sets aside to cover bad loans, the latest sign that soaring personal debt is squeezing banks and shops in Africa’s top economy.

JD Group, which sells beds, sofas and electronic equipment to mass-market customers who often buy on credit, also reported a 10% drop in full-year earnings and said it expected the strain on shoppers to continue.

Rising food and fuel costs and slow economic growth are making it difficult for many South Africans to pay back their loans on time. One in every four South Africans is unemployed and the number of borrowers with impaired credit records — three or more payments in arrears — has risen to nearly 50%.

"Management’s view is that the overextended consumer and challenging trading environment will continue into the foreseeable future," the company said.

JD Group said it lifted its bad debt provisions on its loan book — the money it sets aside to cover defaults — to R966m from R557m in 2012.

JD Group, which is about 50%-owned by South African furniture maker Steinhoff International, said headline earnings per share totalled 395c in the year to end-June, from 441c a year earlier.

The company kept its dividend at 232c a share.

JD Group CEO David Sussman said the company could now focus on thriving in a market, rather than internal  reorganisation.

“You can see from our share price rising today that the market is recognising change at JD Group. The market recognises that we are getting to the end of reorganisation within the group. We spent a couple of years implementing new IT platform. This meant we had to train all of our staff countrywide. This is now done. We can focus now,” he said.

Secondly, he said the market recognised how JD Group had maintained its dividend.

“I believe investors will see that we are comfortable with our projected future cash flow. We are able to maintain a strong dividend,” he said.

Shares of the company were up 3.3%.

Reuters, with Alistair Anderson