Bad news for domestic workers in South Africa

Domestic workers in South Africa are facing immense financial pressure. Their earnings have not kept up with rising living costs, and employers are increasingly unable to afford their services. 

South Africa’s poor economic growth has handicapped the earning potential of many employees in the country. 

As companies struggle to grow, they cannot hire more people or give existing employees above-inflation salary increases. 

Standard Bank chief economist Goolam Ballim referred to this as ‘subsistence investing,’ where businesses invest solely to keep the company operational.

This means they do not invest to grow the company, its earning potential, or its staff complement. 

As a result, South African wages have struggled to keep pace with inflation over the past few years, and thus, many middle-income households can no longer afford domestic workers. 

SweepSouth’s 7th Annual Domestic Workers Report revealed that 36% of people in this sector have lost their job over the past year. 

The company’s CEO, Lourandi Kriel, told KayaBiz that this is largely attributable to the poor performance of the local economy. 

Aside from many losing their jobs, domestic workers have also experienced lacklustre earnings growth in the past few years, pushing some into debt to afford basic necessities. 

SweepSouth’s data showed that the average domestic worker earns around R3,400 per month, while those on its platform earn 54% more at R5,200 per month. 

These average earnings are only up 5% year-on-year, below South Africa’s headline inflation. 

The company’s data showed that living costs for domestic workers have risen around 15% in the same period, revealing a significant gap between earnings growth and the money needed to survive. 

Thus, many have resorted to debt to purchase basic goods and maintain their lifestyles. The report showed that around 35% of domestic workers are stuck in a debt cycle and struggle to make monthly repayments. 

Furthermore, 75% of domestic workers told SweepSouth that they cannot save any money to protect themselves in the future and provide a buffer if they lose their jobs. 

Many of these domestic workers are the sole financial providers in their households, placing immense responsibility on them to provide food, shelter, and transport for their families. 

The key statistics from SweepSouth’s report can be seen in the graphic below. 

Domestic workers are not the only South Africans turning to debt to afford basic necessities and maintain their lifestyles. Reserve Bank data showing around 9% of all household disposable income is used to pay off debt. 

The Reserve Bank said household debt rose towards the end of 2023, in line with increased spending. 

This indicates that South Africans are increasingly turning to debt and credit to fund their lifestyles as the rising cost of living continues to bite. 

However, disposable income rose quicker than debt in the last quarter of 2023, reducing total household debt as a share of disposable income to 62.3%. 

Debt-servicing costs paid by households remained unchanged at 9% of disposable income. This means that nearly R10 of every R100 earned in South Africa goes to servicing existing debt. 

Much of the debt-servicing costs come from a sharp spike in household debt during the Covid-19 pandemic, with debt peaking at nearly three-quarters of income. 

Coupled with the rapid rise in interest rates, South Africans are spending more of their income on debt-servicing costs than at any time in the last five years. 

The growth in debt-servicing costs has moderated slightly as South Africans have adapted to the rising cost of living in the country. Instead of taking on more debt, they are substituting spending on luxuries for necessities. 

These trends are shown in the graph below.