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Alarming new data reveals deepening financial pressure in South Africa

South Africans are experiencing increasing financial stress, particularly among older age groups, as stagnant incomes and rising costs drive a growing reliance on personal loans and debt counselling.

According to DebtBusters’ Q1 2025 Debt Index, the average age of new debt counselling applicants has risen to 41—a notable shift that reflects broader financial strain.

The proportion of applicants aged 45 and older has surged from 19% in 2016 to 33% in 2024, highlighting how economic pressures are increasingly affecting older working-age individuals.

This shift not only reflects rising financial pressure but also leaves individuals with far less time to recover financially or adequately plan for retirement.

And trend is compounded by a 53% decline in purchasing power since 2016, due to inflation consistently outpacing wage growth. Despite nominal salary increases over the years, real income has stagnated or declined.

As of 2025, average nominal incomes for new debt counselling applicants are now 1% lower than in 2016, while cumulative inflation has reached 52%. Consumers have struggled to keep up with rising expenses—electricity tariffs are up 135%, and petrol prices have climbed by 88% over the past nine years.

In response, a growing number of South Africans are turning to unsecured credit to bridge the gap. 91% of consumers applying for debt counselling in Q1 2025 had at least one personal loan, and 37% had taken out short-term, one-month payday loans.

This marks a record-high dependence on personal credit as a stopgap for essential expenses.

It’s clear that while consumers may feel a little more positive, personal loans, especially one-month loans, remain a lifeline for many because income has not kept pace with rising expenses, said Benay Sager, executive head of DebtBusters.

Debt repayments now consume an average of 69% of take-home pay for those seeking counselling – the highest level since 2017.

The debt burden cuts across income levels: low-income earners (R5,000 or less per month) spend 76% of their income on debt, while high-income earners (R35,000 or more) allocate 77%.

Complicating matters further is the impact of interest rate changes. Since late 2021, a series of rate hikes pushed the repo rate to a peak in Q4 2023. Although it stabilized and slightly decreased in Q4 2024, new applicants continue to face elevated borrowing costs.

This has affected the structure of consumer debt: the share of home loan debt among new applicants has grown since 2022, now making up 27% of their total debt, reflecting both changing borrowing patterns and the long-term impact of rate fluctuations.

Amid these challenges, there’s cautious optimism from recent reforms such as the rollout of the ‘two-pot’ retirement system, which may provide limited liquidity relief. Yet the broader picture remains troubling: South Africans are under unprecedented financial pressure, and older adults are increasingly at the centre of this crisis.

Consumer purchasing power falls 53% in nine years in South Africa

A growing number of South Africans are relying on personal loans to bridge the gap between their income and the rising cost of living, even as consumer confidence improves and the rollout of the ‘two-pot’ retirement system offers some financial relief.

According to DebtBusters’ Q1 2025 Debt Index, 91% of consumers who applied for debt counselling during the quarter had at least one personal loan—a record high. Additionally, 37% had taken out a one-month or payday loan.

“It’s clear that while consumers may feel a little more positive, personal loans, especially one-month loans, remain a lifeline for many, because income has not kept pace with rising expenses,” said Benay Sager, executive head of DebtBusters.

Over the past nine years, the financial pressure on households has intensified. Electricity tariffs have surged by 135%, petrol prices have increased by 88%, and cumulative inflation stands at 52%.

As a result, consumers applying for debt counselling in Q1 2025 now allocate an average of 69% of their take-home pay to debt repayments—the highest level since 2017.

The burden is particularly severe for low- and high-income earners alike. Those earning R5,000 or less per month use 76% of their income to service debt, while earners above R35,000 spend 77%. These figures represent the highest debt-service ratios on record since DebtBusters began tracking this data in 2016.

Compared to 2016, today’s consumers have seen their purchasing power decline by 53%. Despite a recent slowdown in inflation, average nominal incomes for new debt counselling applicants are now 1% lower than in 2016.

Over the same period, cumulative inflation has reached 52%. There is some improvement among higher-income earners: those taking home R35,000 or more have experienced an 11% increase in nominal income since 2016—the first significant growth in years.

Household budgets remain under extreme pressure. Consumers in most income brackets now spend around 25% of their remaining disposable income – after servicing debt – on basic necessities like water, electricity, rates, and transport.

Soaring food prices have forced many to cut back on insurance and assurance cover. For lower-income groups, who spend a greater portion of their income on food, the effective rate of inflation has been 2% to 4% higher than the average in recent years.

Meanwhile, high-income earners are grappling with unsustainable levels of unsecured debt. Although average unsecured debt levels are 34% higher than they were nine years ago, the increase is 90% among those earning R35,000 or more—the highest ever recorded.

Despite growing debt pressures, Sager noted that interest in debt counselling has been “a bit muted” compared to previous years. He attributed this to ongoing uncertainty in the macroeconomic environment, access to retirement savings, and “some negative marketing against debt counselling”.

Encouragingly, more consumers are successfully completing the debt counselling process. Since 2016, the number of people who have exited with clearance certificates has increased elevenfold. In Q1 2025 alone, those completing the programme repaid over R700 million to their creditors.

Interest in online debt management tools is also on the rise. Compared to the same period last year, usage grew by 6%, with subscriptions to DebtBusters’ proprietary tools – Debt Radar and the Debt Sustainability Indicator – now exceeding 1 million users.

Financial strain across South Africa’s income groups

A study by debt management service, DebtBusters, shows that upper-middle-income South Africans earning more than R420,000 per year are experiencing significant financial distress.

Despite relatively stable salaries, these individuals are spending an overwhelming 74% of their take-home pay on servicing debt— the highest percentage across all income groups.

The study, which examined data from various income brackets, highlights the increasing financial pressure faced by South African households.

On average, consumers allocate 68% of their income towards debt repayments, with high-income earners bearing the greatest burden.

The DebtBusters Q4 2024 report shows that high-income earners face a debt-to-income ratio of 187%, meaning they owe nearly double their annual earnings.

Major contributors to this debt are home loans and vehicle financing, which make up a significant portion of their monthly repayment commitments.

In contrast, individuals earning between R240,000 and R420,000 annually have a debt-to-income ratio of 137%, while lower-income groups are facing even more severe financial challenges.

The study also sheds light on how South Africans across various income brackets allocate their spending beyond debt repayments:

-Top Earners (R420,000+): The largest proportion of non-debt income is spent on medical aid and insurance, accounting for 13% of their disposable income.

-Middle-Income Earners (R10,000–R20,000): This group dedicates 31% of their income to housing costs, the highest proportion across all income bands.

-Low-Income Earners (Under R5,000): Individuals in this group spend more than 50% of their disposable income on groceries, while only 9% is allocated to accommodation.

Consumers have faced significant increases in the cost of living over the last decade.

Inflation has surged by 144%, petrol prices have risen by 172%, and electricity tariffs from Eskom have jumped by 235%, while salaries have only grown by 98%, making it difficult for many households to maintain financial stability.

Benay Sager, executive head of DebtBusters, commented: “The disparity between income growth and rising living costs is alarming. This has forced many South Africans to cut back on essential expenses, such as housing and groceries, to make ends meet.”

The study also reveals a concerning trend regarding retirement savings. Only individuals in the top two income bands allocate any portion of their income to long-term savings, leaving lower-income groups with little ability to save for retirement.

“The recent changes to the two-pot retirement system are a step in the right direction, but there is still much work to be done to educate South Africans about the importance of long-term savings,” Sager said.

South Africa’s emerging middle class battles debt and inflation pressures

South Africa’s working class is now the fastest-growing segment of the population, with millions of households moving up from poverty or the working poor.

However, breaking into the middle class has become increasingly difficult.

A recent study by the UCT Liberty Institute of Strategic Marketing, commissioned by Liberty and Standard Bank, reveals that 1.2 million households have joined the working class in the past decade.

This segment is defined as households earning between R8,000 and R22,000 per month.

These households, which represent a quarter of South Africa’s population, are largely made up of individuals with some tertiary education. Despite having dual incomes in some cases, their earnings still fall below R22,000.

Low economic growth, high debt, and limited resources impede their upward mobility, the lender said.

“Formal education has helped many move towards the middle class, but the working class faces a highly unstable journey. Retrenchments, short-term work contracts, or the death of a breadwinner can quickly push households back into poverty,” said Motlatsi Mkalala, executive head of middle market at Standard Bank.

Despite a combined annual spending power of R550 billion and 300 new working-class households emerging daily, per capita spending remains low.

Many working-class families support extended family members and spend more on essentials such as food as inflation continues to rise.

Commuting is also a heavy burden, with many spending an average of two hours daily traveling to work. For some, both travel time and transport costs have doubled.

To cope with these financial pressures, many are turning to debt. As a result, only 34% of working-class consumers surveyed feel financially stable, compared to 69% of middle-class earners.

“These challenges highlight the need for accessible tools that provide real-time insights into spending habits and help the working class make informed financial decisions daily,” said Mkalala.

Standard Bank’s data showed that almost half of salaried South Africans are left with less than R1,000 or face negative balances by payday. Middle-income earners make up the largest group affected.

The bank analysed data from over 402,000 individuals who receive their salaries on typical pay dates. On the day before payday, 21% of individuals had less than R1,000 in their accounts, while 28% had negative balances or relied on overdrafts.

Only half of the individuals had more than R1,000 in their accounts.

Even higher-earning South Africans are feeling the pressure, with emerging middle-income earners being the highest proportion of customers with less than R1,000 or in overdraft.

Standard Bank said that the research underscores the need for sustainable credit solutions to protect this segment from exploitative lending.

Debtbusters’ Q4 2024 Debt Index found that in 2024, consumers remained proactive in managing their credit, with debt counselling inquiries up by 8% and online debt management rising by 9%.

While interest in debt counselling was somewhat muted compared to previous years, demand is expected to increase in 2025 as consumers strive for financial sustainability.

Despite improved financial confidence, some trends persist. Income growth, though better than in previous years, still lags behind rising expenses: electricity tariffs have increased by 135%, petrol by 72%, and inflation by 44% since 2016.

As a result, consumers seeking debt counselling in Q4 2024 used 68% of their take-home pay to service debt.

A large portion of these individuals had personal loans (82%) and payday loans (52%), relying on short-term credit to supplement income.

Key findings for Q4 2024 debt counselling consumers:

-Purchasing power: Real incomes have effectively decreased by 42% since 2016, factoring in inflation. However, those earning R35k+ p.m. saw a 10% nominal increase in income.
-Debt burden: On average, consumers spent 68% of their income on debt service, the highest since 2017. For those earning R35k+, this rose to 74%. -Vulnerable consumers earning R5k or less spent 75% of their income on debt.
Unsecured debt: Unsecured debt levels were 29% higher than in 2016, with those earning R35k+ p.m. carrying 60% more unsecured debt.

Since 2016, average unsecured loan size increased by 29% whereas the volume of new unsecured loans declined by 27%.

This means larger unsecured (personal) loans are being granted to a smaller number of consumers, highlighting that risk is being concentrated on an ever-smaller group of consumers, BebtBusters noted.

Before you celebrate your salary increase, look at real world inflation in South Africa

While it may seem like South Africa’s economy is bouncing back with recent positive reports on inflation and interest rates, the financial reality for many consumers remains challenging.

Despite income growth being better than in previous years, it still fails to keep pace with the rapid rise in everyday expenses, leaving many South Africans struggling to make ends meet.

According to the latest DebtBusters Q4 2024 Debt Index, consumers in South Africa are facing a significant challenge when it comes to debt repayments.

For those earning more than R35,000 per month, the total debt-to-annual net income ratio is a staggering 187%, with 74% of their take-home pay used just to service their debts.

For those earning less than R5,000, the numbers are equally concerning, with 72% of their monthly income being dedicated to debt repayment.

The financial strain is even more evident when comparing the prices of essential goods. Since 2016, electricity tariffs have increased by 135%, petrol prices have surged by 72%, and inflation has compounded by 44%.

These increases have diminished the purchasing power of consumers, with many seeking debt counselling to deal with the growing burden.

The Q4 2024 Debt Index reveals that consumers seeking debt counselling needed, on average, 68% of their take-home pay just to service their debt before reaching out for help.

This is the highest recorded level since 2017, underscoring the financial pressure many are facing.

Despite the increase in income for some consumers, the real impact of inflation is stark. For example, consumers applying for debt counselling in Q4 2024 had 42% less purchasing power than they did in 2016.

Nominal incomes have increased by just 2% over the past eight years, but inflation has far outpaced this, leaving consumers with less disposable income.

DebtBusters has seen an uptick in demand for online debt management tools, with a 9% increase in enquiries for Q4 2024 compared to the previous year.

This shows that more consumers are proactively addressing their debt before it becomes unmanageable.

Additionally, the number of successful debt counselling completions has risen eight-fold since 2016, with over R667 million worth of debt repaid by those who successfully completed the counselling process in Q4 2024, it said.

Benay Sager, executive head of DebtBusters, said the subscriber base for free online debt-management tools reached over a million in 2024.

The Debt Index also found Q4 2024 to be the second consecutive quarter where the median debt-to-annual-income ratio increased from all-time lows.

Currently, this figure is 113%, indicating that consumers are still experiencing the effects of interest rate increases that began in November 2021, and despite some respite, remain elevated.

“Eighty-two per cent of those who applied for debt counselling during the quarter had a personal loan and 52% a one-month loan. This indicates that consumers continue to supplement their income with short-term loans and personal loans have become a lifeline for many people,” said Sager.