People under the age of 35 are being targeted in South Africa
South Africa’s youth are increasingly denied formal lines of credit amid heightened unemployment, leading to many resorting to illegal lenders.
Statistics South Africa’s latest figures for the first quarter reveal that youth unemployment exceeds 40%, highlighting that young people are disproportionately affected by rising unemployment.
At the same time, various sectors are facing increasing skills shortages.
Head of National Debt Advisors, Sebastien Alexanderson, said that young people are inheriting their parents’ dreams without the economic conditions to make them attainable.
“A generation ago, a first job could reasonably lead to a first car, a deposit on a flat, and eventually a bond; today that financial scaffolding has completely collapsed,” said Alexanderson.
“A monthly grocery basket alone costs R5,443, a staggering 263% surge since 2009, completely swallowing a full-time minimum wage salary of R4,600 before rent, transport, or debt are even factored in.”
Alexanderson said that as student debt triples and the average NSFAS loan increases from R30,000 to R90,000, many graduates are compelled to seek credit before they have had a fair opportunity to establish their financial independence.
In South Africa, the youth unemployment rate is 45.8% among individuals aged 15 to 34. Among the youngest demographic, aged 18 to 24, this figure exceeds 60%.
In the first quarter of 2026 alone, more than 258,000 young people lost their jobs.
The group said that for young South Africans earning between R20,000 and R45,000 a month, escaping poverty does not equate to financial freedom; instead, it often means becoming a financial lifeline for others.
Alexanderson emphasised that for young South Africans who are excluded from stable employment and formal credit options, financial gaps are increasingly being filled by far more dangerous alternatives than credit cards.
“Despite credit applications rising to 18.53 million in late 2024, the rejection rate from formal banks held at a brutal 65.3%. Nearly two in three applicants were turned away,” said Alexanderson.
“But desperate people don’t stop needing to eat or pay rent when a bank rejects them; they simply go elsewhere,” he said.
Financially literate but susceptible
Research by 71point4 Consulting revealed that nearly 60% of borrowers denied formal credit turned to mashonisas, informal loan sharks.
These illegal lenders frequently charge interest rates of up to 50% per month, and occasionally up to 120%, and sometimes enforce repayments through coercive tactics such as seizing bank cards and ID documents.
“There are an estimated 50,000 of these informal lenders operating across South Africa, and that doesn’t even count the neighbour, friend, or friend-of-a-friend operating even more informally right out of their homes,” said Alexanderson.
Alexanderson added that the group of youths referred to is not financially illiterate.
“This is a generation that is educated, resourceful, and desperate to work, to earn, and to live. They turn to loan sharks because the formal system slammed the door in their faces and left them with no viable alternative,” said Alexanderson.
In light of these challenges, the conversation around finding sustainable solutions becomes even more pressing.
According to Retail Motor Industry Organisation (RMI) CEO, Ipeleng Mabusela, the automotive aftermarket presents a unique opportunity to address both challenges simultaneously.
“South Africa’s youth unemployment crisis and the automotive sector’s artisan shortage may appear to be two separate challenges, but together they present a powerful opportunity,” said Mabusela.
“The backbone of our automotive and transport sectors – mechanics, electricians, panel beaters and technicians – is ageing fast, while too few young people are stepping in to replace them.”
He said that at the same time, many talented youth remain unaware of the career opportunities available to them.
Despite the National Development Plan’s goal of producing 30,000 artisans annually by 2030, statistics from the Motor Industry Bargaining Council (MIBCO) indicate a decline in the number of qualified artisans and registered apprentices across various automotive trades.
“We are seeing more young people, and particularly more women, entering technical careers and excelling in areas ranging from diagnostics to motor body repair,” said Mabusela.
The RMI said that it remains important to change perceptions around vocational careers, which remains one of the industry’s biggest priorities.
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