South Africans have less money today than in 2016

DebtBuster’s Q1 2025 Debt Index revealed that South Africans have less purchasing power today than they had in 2016.

This index found that consumers who applied for debt counselling in the first quarter of 2025 had 53% less purchasing power compared to 2016.

Nominal incomes were 1% lower than 2016 levels. However, when cumulative inflation (CPI) growth of 52% is factored in for the same nine-year period, incoming consumers’ purchasing power was 53% less than in 2016.

Fortunately, those taking home R35,000 or more monthly had better news, Benay Sager, Executive Head of DebtBusters, explained.

“The nominal incomes for this band increased by 11% since 2016 – the first such significant increase for a long time,” Sager said.

However, while the inflationary impact has subsided, the average consumer feels like they are taking home 53% less in real terms today than they did in 2016.

In addition, Sager highlighted that although consumers’ financial confidence improved in 2024, some trends have only worsened.

“Income growth is still behind expense growth: since 2016, electricity tariffs increased by 135%, the petrol price increased by 88%, and inflation’s (CPI) compounded impact is 52%.”

Adding to this financial strain, many South Africans are spending most of their take-home pay on debt. Consumers who applied for debt counselling in Q1 2025 needed 69% of their take-home pay to service their debt expenses.

This is especially pronounced among high and low earners. For those taking home more than R35,000 per month, the total debt to annual net income ratio is 177%.

They also need 77% of their monthly take-home pay to repay their debt. Similarly, those taking home less than R5,000 per month need 76% of their take-home pay to service debt repayments.

After debt repayments, most income bands have used around 25% of their disposable income after debt repayments to pay for electricity, water, rates, and transport.

Additionally, due to food inflation, many income groups have had to allocate more funds to food expenses. For the lowest income band, earning under R5,000, groceries made up over 50% of their monthly expenses.

This crowds out any room for discretionary expenditure on insurance and assurance. For example, those earning under R20,000 per month spent an average of 0% on retirement.

Retirement savings only increased to 1% for those in the R20,000-R35,000 income band and 4% for those earning over R35,000.

Unsecured debt on the rise

91% of consumers who applied for debt counselling during the quarter had a personal loan – a new record. A further 37% of consumers had a one-month (payday) loan.

According to Sager, supplementing income with short-term unsecured credit and personal loans, especially one-month loans, has become a lifeline for many consumers.

Even though the nature of debt is mostly stable, the share of unsecured debt is higher when compared to pre-COVID levels.

Unsecured debt levels were, on average, 34% higher than 2016 levels. While this is lower than inflation (CPI) growth, Sager explained that it needs to be considered in the context of disposable income.

For those earning R35,000 or more, unsecured debt levels were 90% higher – the highest ever. “In the absence of meaningful salary increases, it signals that consumers still need to supplement their incomes with unsecured credit.”

Sager pointed out that, positively, consumers continued to be proactive in managing their credit in Q1 2025, despite a more muted interest in debt counselling compared to previous years.

“The number of consumers who successfully completed debt counselling has increased 11-fold since 2016,” Sager added.

“Moreover, the consumers who successfully completed debt counselling in Q1 2025 paid back over R700 million worth of debt to their creditors as part of the debt counselling process.”