Despite a recent drop in fuel prices and a slowdown in inflation, many South African households are still struggling to stay afloat. “Consumers are feeling little relief,” says Annalien van der Poel, COO of Debt Rescue.
Food prices remain high, interest rates elevated, and wages stagnant—forcing many to rely on credit simply to meet basic needs.
Debt Rescue’s latest survey reveals a worsening cost-of-living crisis. A growing number of households are cutting back on essentials, particularly food, to afford electricity.
Alarmingly, 86% of respondents reported reducing grocery and transport spending to keep the lights on – even before Eskom’s 12.7% tariff hike took effect in April.
Initially, families coped by eating fewer meals. Now, many are cutting essential food items entirely, underscoring deepening financial strain. Vulnerable groups relying on social grants are especially hard hit.
Van der Poel warned that although inflation may be easing, it continues to rise—just at a lower rate—and household incomes aren’t keeping pace.
This pressure is also driving many to draw on their retirement savings.
According to a recent SpendTrend25 report compiled by Discovery Bank and Visa, more than 1.9 million consumers withdrew a combined R35 billion from retirement savings in late 2024 – primarily to cover daily expenses rather than invest for the future.
Of these withdrawals, 24% went to home or car payments, 21% to short-term debt, 20% to education, and 11% to day-to-day living costs.
While inflation fell from 6% to 4.4% during the period, consumer spending remained flat. The report noted that average card spending lagged inflation by five percentage points.
Despite more stable prices, high borrowing costs—particularly with the prime rate holding at 11.75% – continued to weigh heavily on households.
The FinScope Consumer South Africa 2023 survey, released by FinMark Trust, paints a similarly concerning picture. It found that 40% of adults were borrowing money to buy food, and 20 million people went without electricity at some point in the past year because they couldn’t afford it.
According to FinScope data, food alone accounted for over 30% of household income, and total living costs – including groceries, energy, transport, and communication – consumed approximately 85% of monthly earnings. Energy costs, at 11.5% at the time, were significantly above the 10% affordability threshold.
Rising debt levels are compounding the crisis. The National Credit Regulator reported that 23% of consumers missed debt instalments in 2023, and more than 27 million adults were credit-active – many relying on unsecured loans to meet daily needs.
This growing dependency on credit is reducing people’s ability to save, invest, or secure adequate housing – despite 47% of adults indicating a need for housing finance.
Long-term financial planning is also suffering. An overwhelming 86% of economically active adults lack a retirement plan, and two-thirds of middle-income earners (R9,999–R20,000 per month) have no retirement products at all. Survival has overtaken saving as a financial priority.
Under mounting pressure, many South Africans are making use of the recently introduced two-pot retirement system, which allows limited pre-retirement access to a portion of retirement savings.
According to Natasha Huggett-Henchie, consulting actuary and member of the Actuarial Society of South Africa’s Retirement Matters Committee, a growing number of fund members are making repeat withdrawals within just months of their first.
“We are finding that retirement members are taking all they can as soon as they can,” she said.
Fund administrators reported that about 75% of withdrawal applications submitted in the current tax year (from 1 March 2025) were second-time claims. The average amount withdrawn in the first round was R20,000, while current applications average around R6,000.
The two-pot system was created to ensure greater retirement savings preservation. Under the structure, two-thirds of contributions go into a preservation pot, locked until retirement, while the remaining one-third goes into a savings pot, accessible under certain conditions.
To launch the system, members had 10% of their existing retirement savings (capped at R30,000) allocated to the savings pot as of 1 September 2024. Huggett-Henchie explained that members can access their savings pot if the balance – after fees – is at least R2,000.
Those who made a second withdrawal early in the 2025/26 tax year will now have to wait until March 2026 before accessing their savings again.
“If you emptied your savings pot in September last year and continued contributing to a retirement fund, you would have started the new tax year on 1 March 2025 with one-third of your monthly retirement fund contributions accumulated over six months in your savings pot,” said Huggett-Henchie.
“If, say, you contribute R3,000 a month to your retirement fund, R1,000 goes to your savings pot. That means you would have been able to access another R6,000 plus any investment growth at the start of the new tax year.”
As South Africans juggle survival with long-term security, the rising cost of living is driving a troubling dependence on short-term solutions—often at the cost of future financial stability.
