These income brackets owe the most debt in South Africa right now

 ·20 Aug 2021

New data from debt counsellor, DebtBusters, shows that earners in all income brackets in South Africa are worse off when comparing total debt exposure to annual net income.

“It is clear that the debt situation of SA consumers has further deteriorated recently. In the absence of a meaningful increase in real income growth, South African consumers continue to supplement their income with more unsecured credit,” said DebtBusters chief executive Benay Sager.

“Average loan size has increased, and the number of debt obligations (open accounts) has decreased –both indicating that consumers are seeking help sooner.”

Those taking home between R10,000 – R20,000 per month need to spend 6o% of their monthly net income on repaying debt, the group’s Q2 2021 debt index showed.

By comparison, those who earn over R20,000 per month need to spend 62% of their monthly net income on repaying debt.

“Consumers consistently need to spend around 60% of their take-home pay to service their debt before coming to debt counselling,” Sager said.

“More alarmingly, the debt-to-income ratio for all income bands has increased this quarter and is now at its highest levels ever: 122% across all income bands and 152% for those taking home R20,000 or more.”

Sager said that unsecured debt levels were on average 32% higher than 2016 levels, while for those taking home R20,000 or more, the unsecured debt levels were 49% higher.

This is a direct result of erosion of net income (take-home pay) – consumers need to supplement this erosion with unsecured credit.

What people owe money on

DebtsBuster said that the nature of debt is mostly stable, except a growing portion is from financed vehicles.

The group said that vehicle debt has increased in the last few years, indicating that more consumers with assets, vehicles, in particular, are seeking financial assistance.

Banks make up two-thirds of debt (67%), while there has been a slight increase (9%) in the share of unsecured debt over the past year.

In the second quarter, enquiries about debt counselling increased by 18% compared to a year ago. Sager attributes this to the after-effects of the nationwide lockdown and a narrowing of consumers’ borrowing ability.

He said that debt levels had increased substantially. The number of open accounts has decreased for consumers applying for debt counselling, indicating that consumers are seeking help sooner.

The pool of consumer borrowing has also shrunk, as supported by National Credit Regulator data, which indicates that the average unsecured loan size has increased by 46%. The number of loans has decreased by 31% over the last four years.

Read: Warning over major retirement change for South Africa

Show comments
Subscribe to our daily newsletter