Big trouble for South Africans earning over R35,000 a month

 ·16 Nov 2023

Recent financial data shows that South Africans are still struggling to keep up with the cost of living in the country, especially those who earn R35,000 or more per month.

This was revealed in the DebtBusters’ Debt Index report for the third quarter of 2023, which showed those who earn R35,000 or more pay the highest percentage of their income on servicing debt compared to any other income bracket.

The data showed the average South African consumer needs to spend around 63% of their take-home pay to service their debt, with those taking home R35,000 or more a month having the highest monthly debt repayment ratio – needing to use two-thirds (67%) of their income towards debt repayments.

The top income band also has the highest debt-to-income ratio of 164% – the highest recorded since 2016 – which the report noted is a result of bond repayments. Those earning in the top income band have had a 25% increase in overall debt levels since 2016.

The report also highlighted that bond repayments comprise 42% of the debt those who earn over R35,000 or more have in Q3 2023.

Concerningly, in the last seven years, average take-home pay increased by 1% while inflation went up by 41%. This means that in real terms, most South Africans had 40% less disposable income in 2023 compared to 2016 due mainly to the impact of high inflation.

This resulted in the need to supplement this income with unsecured borrowing. On average, consumers have 21% more unsecured debt in 2023 compared to 2016. Those taking home R35,000 or more have unsecured debt levels that are 42% higher than in 2016.

“These numbers indicate consumers continue to use unsecured credit to supplement their incomes, and the situation has worsened significantly due to high inflation and interest rates,” said DebtBusters.

The Debt firm stated that in Q3 2023, there was increased demand from consumers for debt management, with debt counselling inquiries up by 28% and online debt management up by 65% compared to the same period last year.

“For the first time in a while, the median debt to annual income ratio has come down slightly; however, at 108%, it is still at an elevated level.

“We welcome this improvement but still observe that the full impact of successive interest rate increases since November 2021 continues to be felt in consumer finances,” it said.

As we indicated in previous quarters, Debt Busters noted that this was an expected trend, and it anticipates a similar trend for the rest of 2023.

Read: Cheapest retailer for groceries in South Africa right now – Woolies vs Checkers vs Pick n Pay and more

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