Crisis for domestic workers in South Africa

 ·20 Jul 2023

Many South Africans have turned to debt to make ends meet due to the prolonged and heightened cost of living in the country – and now around a third of households are looking to give their domestic workers the chop to free up some extra money.

Eighty20’s latest Credit Stress Report paints a bleak picture for South Africa’s middle-class and affluent households, with prevailing economic pressures feeding through to even those who could previously bear the worst of it.

The report unpacks the credit behaviour of four Eighty20 consumer segments that comprise 78% of all credit active South Africans and 92% of all loan value.

A particularly harrowing data point is that middle-class South Africans, who have seen rising debts and lower incomes, now spend 70% of their monthly income to cover debt instalments.

More worrying is that the stresses are even feeding through to the more affluent market, where 60% of their average monthly income is now going into paying off credit and loans.

Compounding financial pressures on South Africans is the long-standing issue and prevalence of load shedding.

According to the 2023 Old Mutual Savings and Investment Monitor (OMSIM) research report, to keep the lights on and businesses functioning, other than using rechargeable lights, one in three people have spent on inverters and UPS solutions.

Almost 20% have invested in generators (shared and owned) or solar panels, and the average spend on alternative energy solutions is just over R11,000.

Additionally, 1 in 3 people reported replacing appliances because of power surges.

The report reflects the views of just over 1,500 employed South Africans with incomes ranging from R8,000 to R99,999 per month.

Given the immense financial stresses South Africans face, the report also highlighted how households are serving debts and cutting back to save money.

While spending and living costs have risen drastically, the report noted that 70% of South Africans have not seen any improvement in their income since 2020. This means that many have borrowed more over the past year.

According to the report:

  • 54% of those surveyed say they have dipped into savings to make ends meet;
  • 43% have borrowed money from family and friends;
  • 34% took out a personal loan in the last year, doubling from 16% in 2020; and
  • 73% of those polled have a credit card, 35% have a home loan, and 41% have car finance.

Additionally, stressed South Africans are gambling online more (49%), holding down several jobs (50%), and reducing reliance on domestic help, with as much as 33% of households cutting back on paying domestic workers in a bid to stretch their budgets.

This coincides with findings noted in the Credit Stress Report, which indicated 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.

Eighty20 highlighted the country’s financial pressure on middle-class and affluent households 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 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.

Crisis for domestic workers

While the relevance of low-income earners in terms of credit volume is negligible, the stress on these segments is clear, meaning the loss of jobs and job opportunities will put domestic workers in further financial distress.

Mothers of the Nation 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 0.001% 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 tend 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.

Read: Major threat to food prices in South Africa

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