South Africa’s middle class is in serious financial trouble – here’s who’s struggling the most
Data from debt management firm DebtBusters shows South Africans have 31% less disposable income than six years ago as average net income remains stable amid soaring inflation .
The group’s debt index for the first quarter of 2022 showed that two years after the start of the coronavirus pandemic, nominal income fell slightly. But, if we consider the effect of cumulative inflation over the last six years, in real terms, South Africans have 31% less disposable income.
According to Benay Sager, head of DebtBusters, consumers make up for lost real income by borrowing. Worse still, in the first quarter of 2022, requests for debt advice increased by 32% compared to last year.
Unsecured debt levels are 20% higher than in 2016 and for those earning over R20,000 per month, unsecured debt has increased by 54% which is unsustainable.
The consequence of this higher debt burden is that consumers must spend about 62% of their take-home pay to service their debt.
More alarming is that, for the two highest income brackets, debt-to-income ratios are at their highest level in six years. For those who take home more than R10,000 per month, the ratio is 125% and it is 150% for those with a net income of R20,000 or more per month.
According to data from DebtBusters and the National Credi Regulator (NCR), the average size of unsecured loans has increased by 27%, while the number of new unsecured loans has decreased by 13% over the past four years.
This indicates that an increasingly small group of consumers are receiving unsecured loans, DebtBusters pointed out.
Although the average age of new applicants has remained constant, the share of applicants aged 45 or older has increased from 19% to 24% over the past six years, indicating that financial stress is increasingly prevalent in this age category, Sager said.
What do people owe money on
The debt index showed that the nature of debt is generally stable, except that an increasing share comes from financed vehicles. In recent years, auto debt has increased, indicating that more consumers with assets, vehicles in particular, are seeking financial assistance, Debt Rescue said.
Banks account for exactly two-thirds (66%) of debt, while there has been a slight increase (7%) in the share of unsecured debt over the past year.
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