Crisis for South Africans earning over R35,000 a month

South Africans earning over R35,000 a month have hit record levels of debt, taking on unsustainable levels of unsecured borrowing to stretch their budgets to keep up with rising costs.

Purchasing power in South Africa has halved over the last decade, with salary increases not keeping up with inflation, while the cost of things like food, electricity and fuel have skyrocketed.

This has led to today’s consumers having 53% less purchasing power, with incomes actually shrinking in real terms between 2016 and 2025.

According to the Q1 2025 Debt Index from DebtBusters, South African households are in a dire situation, with salaries no longer enough to keep up with the cost of living.

As a result, households have turned to personal loans and one-month loans (also known as payday loans) to ensure they can meet their needs.

Unfortunately, this also saddles them with large amounts of debt which take up the vast majority of their monthly take-home pay to service.

The Index showed that 91% of consumers who had applied for debt counselling with the group had a personal loan. A further 37% had a payday loan.

“This indicates that consumers continue to supplement their income with short-term unsecured credit, and personal loans, especially one-month loans, have become a lifeline for many,” the group said.

On average, households are now spending 69% of their take-home pay each month paying off their debts.

Looking at changes over the past decade, DebtBusters noted that, since 2016 electricity tariffs increased by 135%, petrol prices increased by 88%, and the compunded impact of inflation is 52%.

Meanwhile, the average nominal incomes of incoming cohorts are now 1% lower than 2016 levels, as salary and wage increases have not kept up pace.

“While the inflation impact has subsided, on average consumers are feeling like they are taking home 53% less today in real terms than they did in 2016,” the group said.

Drowning in debt

The impact of crumbling purchasing power is being felt across all income bands, though higher earners have far more stable budgets, DebtBusters noted.

Despite this, higher earners with incomes of over R35,000 a month still carry the greatest debt burdens, with an annual debt to income ratio of 177%.

This is predominantly due to home loan and vehicle finance debt. Monthly debt repayments for this group are at 77% of monthly income – the highest among the earnings ranges.

DebtBusters noted that top earners in South Africa have reached unsustainable levels of unsecured debt.

“On average, unsecured debt levels are 34% higher than nine years ago—but for people taking home R35,000 or more, it has increased by 90%, the highest ever,” it said.

Total debt levels, which include both secured and unsecured debt, are 3% higher than they were in 2016.

While this looks healthy overall and is lower than the CPI increase over the same period, for top income earners, overall debt levels are 39% higher than 2016 levels, showing that these consumers are under significant financial pressure.

Real pain is also being felt at the lowest income bracket of under R5,000 a month.

While this group has the lowest annual debt to income ratio of 86%, they need to pay around the same amount of their monthly income to pay off loans as the highest income group (76%).

This reflects the high interest rates charged on short term and unsecured loans, leaving very little disposable income for other needs.

Consumers in most income bands spend 25% of their disposable income, after debt repayments, to pay for water, electricity, rates and transport.

DebtBusters’ data shows that the lowest income group spends 51% of what remains on food, compared to the 23% in the highest income group.

Food inflation has meant many have had to sacrifice insurance and assurance cover.

For people in lower-income groups, who spend a larger portion of their income on food, food inflation has meant that they have experienced 2% – 4% more inflation over the past few years.