South African Consumers Have 42% Less Spending Power Than Nine Years Ago

South African consumers are getting poorer, with rising debt and stagnant salaries making it harder to keep up with the cost of living. A recent report by DebtBusters for the fourth quarter of 2024 revealed that consumers now have 42% less purchasing power than they did in 2016.

Debt is Eating Up South African Incomes

One of the most alarming findings in the report is that South Africans are using 68% of their take-home pay just to service debt, leaving little room for basic expenses. For those earning R35,000 or more per month, this figure rises to 74%, showing that even higher-income earners are struggling.

“Consumers are feeling the effects of years of interest rate hikes, inflation, and slow salary growth,” said Benay Sager, executive head of DebtBusters.

Although nominal salaries have increased by 2% since 2016, this growth has been overshadowed by 44% cumulative inflation, which has significantly eroded spending power.

The Debt Trap: More Loans, Less Financial Security

The report highlights that South Africans are increasingly relying on unsecured debt to supplement their incomes.

• Unsecured debt is 29% higher than in 2016, and for those earning over R35,000 per month, it’s 60% higher.
• 82% of debt counselling applicants had a personal loan, and 52% had a one-month loan, showing a dependence on short-term credit.
• Many consumers in their twenties are falling into debt traps due to vehicle financing and balloon payments, often without understanding interest rates.

“Short-term loans and personal credit have become a lifeline for many South Africans,” Sager noted.

Are Consumers Taking Control of Their Debt?

Despite financial pressures, more South Africans are turning to online debt management tools and debt counselling to regain control of their finances.

• Debt counselling inquiries increased by 8% compared to 2023.
• Consumers using these services can renegotiate unsecured debt interest rates from 24.6% to as low as 2.5%, helping them pay off debt faster.
• Vehicle debt interest, which averages 15.4%, can also be renegotiated and extended.

What’s Next for South African Consumers?

While there was some financial relief in late 2024 due to lower inflation, interest rate cuts, and the absence of load-shedding, consumers remain financially strained.

The introduction of the two-pot retirement system, which allows early withdrawals, has helped some households, but it’s not a long-term solution.

With median debt-to-income ratios rising—113% on average, 137% for those earning R20,000 per month, and 187% for those taking home R35,000 or more—South Africans remain heavily indebted.

South African consumers are struggling more than ever, with rising debt, slow salary growth, and high living costs leaving them with less spending power than in 2016. While more people are exploring debt management options, a sustainable solution is needed to prevent further financial distress.

Do you think South African households will recover from this debt crisis?

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