South Africans Earning Over R400,000 a Year Face Heavy Debt Burden, Study Reveals

A recent study by DebtBusters, South Africa’s largest debt management company, has revealed that upper-middle-income South Africans earning more than R420,000 a year are facing a significant debt crisis. Despite having relatively stable incomes, these individuals are spending a staggering 74% of their take-home pay on debt repayments, the highest among all income brackets.

The study, which analyzed data from clients across five income groups, highlights the growing financial strain on South African households. It found that, on average, consumers spend 68% of their income servicing debt, with those earning over R420,000 bearing the heaviest burden.

The Debt Crisis in Numbers

According to the DebtBusters Q4 2024 report, high-income earners have a total debt-to-annual-net-income ratio of 187%. This means their debt is nearly double their annual income. The primary drivers of this debt are home loans and vehicle asset finance, which account for a significant portion of monthly repayments.

In comparison, those earning between R240,000 and R420,000 annually have a debt-to-income ratio of 137%, while lower-income groups face even greater challenges in managing their finances.

Spending Priorities Across Income Groups

The study also provides insights into how South Africans in different income brackets allocate their spending outside of debt repayments:

• Top Earners (R420,000+): Spend the most on medical aid and insurance, allocating 13% of their non-debt income to these expenses.
• Middle-Income Earners (R10,000–R20,000): Spend 31% of their income on housing, the highest proportion among all groups.
• Low-Income Earners (Under R5,000): Spend over half of their disposable income on groceries, with only 9% allocated to accommodation.

The Impact of Rising Costs

Over the past decade, South Africans have faced steep increases in the cost of living. Inflation has risen by 144%, petrol prices by 172%, and Eskom’s electricity tariffs by 235%. In contrast, salaries have only increased by 98%, creating an unsustainable financial environment for many households.

“The disparity between income growth and rising living costs is alarming,” said Benay Sager, Executive Head of DebtBusters. “This has forced many South Africans to cut back on essential expenses, such as housing and groceries, to make ends meet.”

Retirement Savings: A Growing Concern

The study also highlights a worrying trend in retirement savings. Only the top two income groups allocate any portion of their income to long-term savings, with lower-income earners unable to prioritize retirement planning.

“The recent changes to the two-pot retirement system are a step in the right direction, but there is still much work to be done to educate South Africans about the importance of long-term savings,” Sager added.

What’s Next?

The findings underscore the urgent need for financial education and debt management strategies to help South Africans navigate the growing debt crisis. For high-income earners, the challenge lies in balancing debt repayments with essential expenses and long-term financial planning.

As the cost of living continues to rise, the pressure on households is unlikely to ease. Addressing this issue will require a concerted effort from policymakers, financial institutions, and individuals alike.

The DebtBusters study paints a stark picture of the financial challenges facing South Africans, particularly those earning over R420,000 a year. While their incomes may appear stable, the heavy debt burden they carry highlights the need for better financial management and support systems.

For now, the message is clear: South Africans must prioritize debt reduction, savings, and financial literacy to secure a more stable and sustainable future.

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