Data-driven consultancy Eighty20, in partnership with Xpert Decision Systems (XDS), has released its 2025 Q1 Credit Stress Report, providing a comprehensive analysis of consumer credit behaviour in the context of major economic and geopolitical developments.
The report explores how the first quarter unfolded amid global uncertainty, particularly following the outcome of the US election and president Trump’s tariff policies, which have introduced renewed volatility into global markets.
While the full impact on South Africa’s economy remains unclear, early indicators point to rising financial stress.
Economic outlooks have dimmed. Moody’s Ratings and the Bureau for Economic Research (BER) both revised South Africa’s 2025 real GDP growth forecast from 1.8% to 1.5%, reflecting increased caution.
Bloomberg reported last week that a median forecast of 26 economists surveyed May 22-27 suggested growth would be 1.2% this year.
Last month, the forecast was reduced to 1.5% from 1.7%. For next year, it was shaved by 0.2 percentage points compared with last month’s poll to 1.6%.
South African Reserve Bank (Sarb) governor Lesetja Kganyago announced a 25-basis-point cut to the benchmark repo rate on Thursday, lowering it to 7.25% and bringing some relief to indebted consumers.
However, the Sarb trimmed its GDP projections, with expected growth of 1.2% this year, rising to 1.8% by 2027.
The South African credit market continued to grow in Q1 2025. The number of credit-active consumers increased by 2% year-on-year, while total credit products rose by 4%.
Outstanding loan balances reached R2.56 trillion – up R127 billion (5.3% YoY) – with credit card and retail credit products driving over 7% growth.
However, this expansion came with mounting strain:
- Overdue balances climbed to R208 billion, a R25 billion increase year-on-year, now accounting for 8.1% of all debt.
- Home loan overdue balances rose by 21% YoY, while credit card delinquencies increased 18%.
The number of loans in arrears grew for the first time in two years, adding 353,395 accounts and bringing the total to 17.97 million.
Three-quarters of overdue debt is concentrated among the top three income segments: Middle Class, Heavy Hitters, and Comfortable Retirees – indicating that financial stress is widespread, even among higher earners.
This is despite three interest rate cuts over the past year and easing inflation.
Consumers are allocating a larger portion of their income to debt:
- The average installment-to-net-income ratio rose to 28%, nearly a third of take-home pay.
- Among Heavy Hitters (R30,000–R120,000 monthly income), this figure jumps to 48%.
- The Middle Class (R8,000–R30,000) spends 37%—the only segment above the national average.
- Comfortable Retirees and the Mass Credit Market allocate 21% and 19%, respectively.
Within the middle class, credit demand surged, with over one million new loans issued in Q1 – 734,081 of which were unsecured. While the total unsecured loan balance fell slightly to R132 billion, overdue balances for these loans rose by 2%, and credit card arrears climbed 5%.
More than 5,000 individuals from high-earning segments became credit-active for the first time. Remarkably, they accounted for 15% of total new loan balances, highlighting how quickly debt can accumulate for new borrowers, according to Eighty20.
Collectively, these higher-income consumers now hold 65% of the country’s total credit balances, which grew 2.5% during the quarter.
Eighty20 attributes much of the growing financial pressure to the escalating cost of living, echoing findings from DebtBusters’ Q1 2025 Debt Index.
Despite a modest recovery in consumer confidence and the introduction of the ‘two-pot’ retirement system offering some relief, more South Africans are turning to personal loans to bridge the gap between stagnant income and rising expenses:
Ninety one percent of individuals entering debt counselling in Q1 had at least one personal loan—a record high, while 37% held a payday (one-month) loan.
While optimism may be returning, personal and payday loans remain a financial crutch as incomes fail to keep up with the cost of living, said Benay Sager, executive head of DebtBusters.
Long-Term trends underscore financial strain over the past nine years:
-Electricity tariffs have surged 135%.
-Petrol prices are up 88%.
-Cumulative inflation has reached 52%.
As a result, South Africans’ purchasing power has declined by 53%. Nominal incomes for new earners are now 1% lower than in 2016, while those earning R35,000 or more have seen modest gains of 11%.
According to DebtBusters, low-income consumers (earning R5,000 or less) use 76% of their income for debt, while high-income earners (R35,000+) spend 77% – the highest levels recorded since 2016.
On a more positive note, the number of consumers completing debt counselling has grown elevenfold since 2016, suggesting that more South Africans are actively seeking paths to financial recovery.
