Warning to anyone using credit in South Africa
Experts warn that South Africans are sliding into a debt trap, where rather than financing long-term assets, credit is increasingly being used to cover basic daily expenses.
University of Pretoria Head of the Department of Actuarial Science Conrad Beyers warned that household debt is becoming a crisis where working people are increasingly borrowing to survive.
“Credit is increasingly being used not to buy homes or build businesses, but to pay for food, electricity and existing debt. The individual borrows again to service earlier debt,” said Beyers.
Data from the Old Mutual Savings and Investment Monitor 2026 indicates that 40% of respondents experience significant financial stress, increasing to 47% among those earning under R30,000 per month.
From the analysis, half of the respondents frequently express concerns about their debt, showing that people are turning to gambling and informal borrowing.
Beyers said that the true situation is likely worse, as a substantial amount of consumer debt remains hidden from formal credit bureaus.
“The true position may be considerably worse – debt owed to family, stokvels, and unregistered lenders remains invisible to credit bureaus,” he said.
“Some households remain technically up to date only by taking new credit or postponing other payments. Financial collapse is often recorded only at the end of the debt spiral, long after the household has become trapped.”
Beyers strongly critiqued banks’ use of “financial inclusion” as a marketing buzzword to justify pushing more debt onto low-income households.
“Banks cannot remain healthy while the people and businesses supporting them become more indebted and less able to withstand even a small financial shock,” he said.
“Real financial inclusion should help people save”
Beyers explained that real financial inclusion must help customers build resilience, not exploit them.
“The end result of this ‘inclusion’ is often that an increasing part of a salary disappears into interest and repayments, without any growth in assets or financial security,” he said.
“Real financial inclusion should help people save, acquire assets, start businesses and become financially stronger over time. It cannot be measured merely by the number of accounts opened or loans granted.”
A major root of the crisis is that bank incentive structures reward short-term lending over productive investments, which Beyers likens to a short-sighted strategy of “a snake consuming its own tail.”
“Banks continue to earn interest and fees from financially exhausted households while gradually eroding the economic base that sustains them,” he said.
He explained that the model is wrong if it rewards an institution today for decisions that leave its future economic base weaker tomorrow.
To address this crisis, Beyers said that banks must proactively reform their lending criteria, incentives, and products before regulators or the government step in.
He said that banks should use their data to spot distress early and offer “early restructuring, fair consolidation and lower-cost refinancing, rather than another expensive loan.”
He also emphasised that banks should stop marketing new credit to customers who are over-indebted and should make saving and reducing debt at least as easy as increasing a credit limit.
Beyers suggested that banks allocate more capital to viable small businesses, equipment, housing, infrastructure, and other activities that generate income and jobs, rather than focusing on consumer spending.
He urged bank boards to reassess internal targets and judge their performance by “whether customers are financially stronger three or five years later.”
Loading ...