{"id":835550,"date":"2025-08-20T14:19:38","date_gmt":"2025-08-20T12:19:38","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=835550"},"modified":"2025-08-20T14:22:24","modified_gmt":"2025-08-20T12:22:24","slug":"south-africans-hanging-by-a-dangerous-thread","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/835550\/south-africans-hanging-by-a-dangerous-thread\/","title":{"rendered":"South Africans hanging by a dangerous thread"},"content":{"rendered":"\n

South African households are overly reliant on short-term or payday loans to make ends meet, putting them in an extremely precarious position.<\/p>\n\n\n\n

The latest DebtBusters Debt Index for the second quarter of 2025 has revealed that households have buckled under financial pressure, with a 6% increase in demand for debt management and counselling.<\/p>\n\n\n\n

A clear trend among all those who have gone this route is that they have active personal loans, with the group tracking a 95% hit rate.<\/p>\n\n\n\n

Worse still, at least half had one-month or payday loans attached.<\/p>\n\n\n\n

According to DebtBusters executive head Benay Sager, these worrying statistics come even as inflationary pressure has subsided in South Africa.<\/p>\n\n\n\n

Despite this, consumers continue to use loans to make ends meet, ultimately eroding their income.<\/p>\n\n\n\n

This is because, while convenient in addressing short-term needs or even being a needed lifeline for the family, these types of loans are extremely expensive, attracting more than 23% interest per annum.<\/p>\n\n\n\n

Sager said the compounding effect of these high interest rates is clear.<\/p>\n\n\n\n

The median debt-to-annual-income ratio has increased to 112% after declining for most of 2024. Further, the share of income required to service debt has increased to 70%<\/strong>\u2014the highest level since 2017.<\/p>\n\n\n\n

On average, consumers need 70% of their take-home pay to service debt. Those earning R35,000 or more a month spend 78% on debt repayment.<\/p>\n\n\n\n

Debt-to-annual income ratios for top earners are at or near the highest-ever levels.<\/p>\n\n\n\n

For people taking home more than R20,000 a month, the ratio is 138% and for those earning R35,000 or more, it is 185%.<\/p>\n\n\n\n

Sager noted that high-income consumers have high and increasing levels of unsecured debt, currently 33% higher than in 2016.<\/p>\n\n\n\n

For those taking home R35,000 or more, unsecured debt levels were 79% higher than nine years ago. “This is simply unsustainable,” he said.<\/p>\n\n\n\n

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Purchasing power has crumbled<\/h2>\n\n\n\n

Sager noted that many households have no choice but to take out costly loans to balance their budgets.<\/p>\n\n\n\n

While inflation has eased, regulated expenses like electricity, rates and taxes have not. Worse yet, salaries have not kept up with inflation, destroying any hope of consumers maintaining purchasing power.<\/p>\n\n\n\n

“Compared to 2016, electricity tariffs have more than doubled and are now 2.65 times higher; the petrol price has increased by 75%; and the compound impact of inflation is now 51%,” Sager noted.<\/p>\n\n\n\n

In the major metros, municipal rates continue to increase by double digits every year. This all adds to the financial pressure on South African households.<\/p>\n\n\n\n

This was confirmed by Stats SA, which reported a significant uptick in inflation for July, when municipal rates and taxes were hiked, driven in large part by these costs.<\/p>\n\n\n\n

With high levels of inflation over the past decade, amid low growth and financial strain on businesses, South African salaries have not kept up with the rising costs.<\/p>\n\n\n\n

DebtBusters’ data shows that purchasing power has crumbled, with nominal income only increasing by about 2% against the cumulative impact of inflation at 51%.<\/p>\n\n\n\n

This means that a salary today buys 49% less than it did almost a decade ago.<\/p>\n\n\n\n

The impact is even more severe in the R5,000-R10,000 per month and R20,000-R35,000 per month brackets, where nominal salaries have declined 1%- 2%.<\/p>\n\n\n\n

As a result, households have been using credit, loans, borrowing, and even retirement savings to compensate for the lost purchasing power.<\/p>\n\n\n\n

Some South Africans have managed to mitigate the pressures by tapping into resources like withdrawing funds from the two-pot retirement system, but this carries consequences of its own.<\/p>\n\n\n\n

Sager said that access to retirement funds appears to have become a staple for many, with more than 2.2 million South Africans having accessed the two-pot retirement system for a payout of some amount.<\/p>\n\n\n\n

However, withdrawals from retirement funds often kick financial strain down the road, with fund managers constantly urging members to leave their retirement funds alone.<\/p>\n\n\n\n

For greater context, while households on average spend 70% of their disposable income paying off debt, only 2.1%\u2014the average among higher income earners\u2014goes into retirement savings.<\/p>\n\n\n\n

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South African households are overly reliant on short-term or payday loans to make ends meet, putting them in an extremely precarious position.<\/p>\n","protected":false},"author":10,"featured_media":835561,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[],"class_list":["post-835550","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/835550","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=835550"}],"version-history":[{"count":4,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/835550\/revisions"}],"predecessor-version":[{"id":835566,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/835550\/revisions\/835566"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/835561"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=835550"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=835550"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=835550"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}