Warning for South Africans earning R20,000 per month

Finance group Standard Bank has warned that South Africa’s working class are trapped by debt and struggling to break through into the middle-class.

Working-class South Africans are broadly defined as those earning between R8,000 and R22,000 a month. The R22,000 threshold is seen as the entry point into the middle class.

Despite employees in the working class segment often having tertiary qualifications and even dual incomes, many cannot break through the R22,000 per month level.

Motlatsi Mkalala, Executive Head of Middle Market at Standard Bank, said that this is due to South Africa’s poor economy, limited resources and high levels of debt, which are stopping their upward mobility.

The bleak outlook for this segment contrasts with the positive strides made in South Africa to eradicate poverty and the large upward momentum of many people into the working class.

Data from the UCT Liberty Institute of Strategic Marketing—commissioned by Liberty and Standard Bank—show that South Africa’s working class has grown rapidly over the last decade.

The bank said growth in this segment has surged 67%, from 9 million people in 2012 to about 15 million people in 2022, with 300 new working-class households emerging daily.

Mkalala said the working class has an annual combined spending power of R550 billion, up from R280 billion a decade ago.

Wealth in the segment has also shot up significantly, almost doubling. However, despite this almost doubling in spending power, they struggle to go further.

“Many support extended family and spend more on essentials like food as inflation remains high,” Mkalala said.

“Commuting is a heavy burden, with many spending an average of two hours daily on travel. For some, this time has doubled, as have their transport costs.”

Debt problems

One of the key issues flagged by Mkalala is growing debt problems.

Many people earning less than R22,000 a month turn to debt to cope with the financial stresses, leaving the vast majority feeling financially unstable.

This is reflected in the DebtBusters Debt Index and Eighty20’s Credit Stress reports, which show continued strain for mass market or worker-class populations.

Looking at the credit-active worker class population, Eighty20 noted that this group reached 8.3 million people at the end of the third quarter of 2024.

The group’s total credit balances amounted to R107.5 billion, and the average monthly instalment paid on debts was R1,732—19% of income. Unfortunately, the group also shows high default levels.

While the percentage of defaulters across all lending products in the segment was down 3% over the period, it still represents 55% of the total segment.

The primary type of debt in the segment is unsecured loans.

According to DebtBusters, unsecured debts account for between 58% and 78% of debts in the R5,000 to R20,000 income group, declining as income increases.

Looking at total debts—not just credit—those earning in the band need 67% of their income to cover their debts.

However, these stresses are by no means exclusive to the working class.

Despite Standard Bank’s data showing that middle-class households feel far more financially stable—69% reporting less stress—households earning over R22,000 are also still piled high with debt.

According to DebtBusters, middle-class (R22,000 to R35,000) households need 69% of their income to cover their debts.

DebtBusters noted that over the past decade or so, inflation has shot up 144%, petrol prices by 172% and Eskom’s electricity tariffs by 235%.

Salaries, meanwhile, haven’t even doubled, sitting at 98% over the same period for both working and middle-class earners.