R800 per month pain for South Africans who don’t pay tax
In the first half of 2024, even those below the tax threshold in South Africa, like entry-level nurses and administrative staff, are still spending R800 per month on debt to make ends meet.
This is according to consumer analytics and research firm Eighty20, which collects data from 42 million adult South Africans, representing over R3.7 trillion in annual earnings.
Eighty20 observed that the Mass Credit Market segment is mainly comprised of employed individuals earning less than R10,000 per month, with a majority being women working in entry-level roles.
Around 80% of this group have retail store accounts, while 17% possess credit cards.
Their household income is typically double their personal income, and nearly a quarter receive grants, and almost half are single parents.
For example, an individual in this segment earning a gross monthly income of R4,900 falls below the tax threshold. Those in this class include those employed as entry-level nurses and administrative staff.
According to the South African Revenue Service (SARS) tax tables for the 2024/25 financial year, those who are younger than 65 years and earn less than R95,750 a year (or R7,979 per month) are exempt from paying income tax.
These households also include minimum wage earners, which include domestic workers, gardeners, and factory workers.
The National Minimum Wage is now set at R27.58 per hour, R220.64 for an 8-hour day, and R4,633.44 for an average 21-day working month.
According to Eighty20, this class, on average, have debt instalments totalling R800 per month, mostly from retail store card debt.
The other debt represents informal and unsecured loans.
Unsecured debt is debt created without any collateral promised to the creditor. Many lenders note that this tends to be credit card debt and personal loans used to make ends meet every month.
The median instalment-to-income ratio for this segment is approximately 16%, while the average ratio is around 30%.
According to DebtBusters, these earners are on the cusp of dipping into the danger zone.
The debt counselling experts noted that any individual who has more than 30% of their salaries going to debt repayments means their debt levels are unsustainable.
Commenting on the reasons for the Mass Credit Market segment indebtedness, Eighty20 pointed to higher borrowing costs, high cost of living, and stagnant and generally low salary growth over recent years.
It noted that persistently high interest rates and inflation—especially food inflation—continue to erode consumers’ disposable income, while a lack of meaningful economic growth is constraining salaries.
This effect of rampant food prices and low salaries was illustrated the Pietermaritzburg Economic Justice & Dignity (PMBEJD) Group indicates that the current minimum wage is insufficient to cover basic needs in 2024.
The group states that affordability depends on income levels and the cost of goods and services. Workers work to provide for their families and expect their wages to cover their essential expenses.
According to the PMBEJD, In most South African households, only one family member is employed, and their wage must support an average of four people.
However, workers earning the NMW are unable to cover their three essential household expenses with it.
This demonstrates the inadequacy of low baseline wages, as the NMW does not provide workers and their families with the means to meet even their most basic needs.
The data suggests that the NMW contributes to trapping workers and their families in deeper poverty, forcing them to rely more on borrowing to make up for the income shortfall.
The data from the PMBEJD shows that the minimum shortfall in food for a family is 51.9% in June 2024.
After securing transport and electricity workers are left with R1,765.24. If all of this money went to food, then for a family of four, it would provide R441,31 per person per month.
Looking at the cost of items listed as basic nutritional food, the group noted that families in the Mass Credit Market segment underspent on basic nutritional food by a minimum of 18% (R1,150.33) every month.
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