Recent financial data indicates that South Africans are struggling to keep up with the country’s cost of living at the start of 2024, especially those earning over R20,000 per month.
This was revealed in the DebtBusters’ Debt Index report for the fourth quarter of the 2023 financial year, which showed those who earn between R20,000 and R35,000 or over R35,000 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 62% of their take-home pay to service their debt.
Those taking home between R20,000 and R35,000 a month have to spend 64% of their income towards debt repayments, while those earning R35,000 or more a month need to use over two-thirds (71%) of their income towards debt repayments – a 4% increase from 67% recorded in Q3 2023.
The debt-to-income ratio for the top income bands is 131% for those earning R20,000 per month and 171% for people taking home R35,000 or more.
DebtBusters’ head Benay Sager noted that, for these income bands, the ratios are at or close to the highest levels ever recorded.
The report also highlighted that unsecured debt is hammering those earning over R20,000, while bond repayments comprise 41% of the debt of those who earned over R35,000 or more in Q4 2023.
The average interest rate for a bond went from 8.3% annually in Q4 2020 to 12.3% in Q4 2023, and more asset debt has been restructured as part of debt counselling during this period.
“More alarmingly, the average interest rate for unsecured debt is now at an eight-year high level of 25.6% per annum,” said Sager.
Concerningly, in the last seven years, average take-home pay increased by 1% while inflation went up by 40%. This means that in real terms, most South Africans had 39% 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 32% more unsecured debt in 2023 compared to 2016, and 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 2023 was probably one of the most financially difficult years on record for South Africans.
In Q4 2023, debt counselling inquiries were up by 46%, and online debt management was up by 54% compared to the same period last year.
“If we compare the full year 2023, debt counselling inquiries were up by 39% compared to 2022, therefore we saw an acceleration of this trend in Q4 2023,” said Sager.
He added that while it is still the early days of 2024, the group anticipates a similar trend for this year as consumers’ desire to become financially sustainable continues to grow.
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