Trouble for domestic workers in South Africa

 ·8 Jun 2023

As South Africa’s middle-class and affluent households come under extreme pressure, low-income earners – like the thousands of domestic workers who rely on income from private household employment – continue to bear the brunt.

This is one of the findings from the latest Credit Stress report for the first quarter of the year, compiled by consumer analytics and research company Eighty20.

The group noted concerning trends among the all-female low-income group which it dubs “Mothers of the Nation”. Most of South Africa’s 830,000 employed domestic workers fall into this category.

Mothers of the Nation is a low-income segment where individuals earn around R1,000 a month – well below minimum wage. It is the counterpart to the all-male “Hustling Males” segment.

According to Eighty20, both segments are mainly unemployed or underemployed (likely in an elementary occupation), with the majority receiving government grants to survive.

The latest unemployment figures from Stats SA show that domestic workers have fared particularly poorly since Covid with about 200,000 fewer jobs than a few years ago. South Africa has always had about 1 million domestic workers in active employment, but this dropped by around 250,000 workers following the Covid-19 lockdowns.

Despite some recovery, domestic worker numbers have not yet returned to pre-Covid levels. In the first quarter of this year, 67,000 domestic workers lost their jobs.

According to Eighty20, one reason for this could be the financial pressure on middle-class and affluent households in the country, which is causing them to rethink domestic help.

“One way a homeowner under pressure could free up some money would be to clean their house and tend their garden themselves,” Eighty20 said.

The Credit Stress report showed that pressure on household incomes in South Africa is getting worse, with even the more affluent segments now seeing an increase in debt defaults.

While the relevance of low-income earners in terms of credit volume is negligible, the stress on these segments is clear.

Mothers of the Nation and Hustling Males only make up around 10% of the combined 13 million people holding any form of credit, and the total value of their loans is about a tenth of a percent of South Africa’s loan book, Eighty20 noted.

Despite this, the group noted that the “mothers” are under significant stress. What little debt they do carry, some 96% of the value of loans for this segment is made up of retail and unsecured loans, with new defaults up nearly 50% for both products.

While loan balances on both these loans tends to be fairly low – less than R2,000 – nearly 14% of all retail loan value goes into default every quarter, which is double the South African retail default average.

This has also been reflected in recent financials from lenders that cater to these segments – Capitec and African Bank both registered increases in credit impairments as South Africans came under increased stress.

Capitec, with a customer base of 20 million South Africans, noted that many more households – especially in the lower-income segments – turned to loans to survive the political and economic storms of the last year.

However, given rising rates and constrained incomes, they have been unable to repay these loans.

African Bank this week published its interim results showing the same situation.

The group’s credit impairment charges on loans and advances blew up by a staggering 240% to R2,240 million (H1 22: R658 million) for the period, which resulted in a credit loss ratio of 11.1% (H1 22: 4.8%).

The consumer banking division was the area of concern, with the division’s credit loss ratio totalling an elevated 13.6%.

African Bank said that retail consumers are suffering the most from the poor economic climate due to high food prices and fuel inflation, which is affecting their ability to service their debt.


Read: New laws for domestic workers in South Africa – important deadline for all employers hitting this month

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