Ina Opperman

By Ina Opperman

Business Journalist


Indebted consumers have 39% less buying power than in 2016

With high interest rates, inflation and poor growth affecting their disposable income, short-term loans and personal loans have become a lifeline for many.


Indebted consumers now have 39% less buying power than in 2016, while their nominal income is only 1% higher when cumulative inflation of 40% is considered. They also have on average 32% more unsecured debt than in 2016 and a much higher debt-service burden.

According to the DebtBusters’ Q4 2023 Debt Index released on Tuesday, consumers who applied for debt counselling in the fourth quarter are much worse off than in 2016, when DebtBusters began collecting and analysing the data.

They also have a higher debt-service burden. Before entering debt counselling, consumers spend on average 62% of their take-home pay to service debt. Those earning R35 000 or more per month use 71% of their income to repay debts.

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. For these income bands the ratios are at or close to the highest-ever levels.

In addition, they have unsustainably high levels of unsecured debt. Their unsecured debt is, on average, 32% higher than in 2016. For those taking home more than R35 000 a month, it is 42% higher.

ALSO READ: Debt index shows high-income earners are still battling

Unsecured debt used to supplement dwindling income

“Although this is on par with inflation, it shows that in the absence of meaningful salary increases, consumers are supplementing their income with unsecured debt,” Benay Sager, executive head of DebtBusters, says.

“Increasing food, electricity and fuel prices drove inflation, with the Reserve Bank countering by increasing and sustaining interest rates which are now 475 basis points higher than in 2020. In addition, crippling levels of loadshedding constrained meaningful economic growth and consequently salary increases.

“The average interest rate for a bond grew from 8.3% per year in the fourth quarter of 2020 to 12.3% by the fourth quarter of 2023. Average interest rates for unsecured debt are now at an eight-year high of 25,6%,”

The index found debt counselling enquiries increased by 46% and demand for online debt management was up 54% compared to the same period in 2022. Full-year debt counselling enquiries grew by 39% compared to 2022, indicating an acceleration in the final quarter of 2023.

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Indebted consumers are trying to manage debt

Sager says that while the combination of high inflation, interest rates and poor economic performance negatively impacted disposable income, the fact that more people are seeking help to manage debt is positive.

“The increasing use of online debt-management tools indicates consumers are more proactive about debt before it gets out of control. The data also points to more people considering debt counselling as an effective way to deal with debt in a high-interest environment.”

When consumers enter debt counselling, debt counsellors can renegotiate interest rates for unsecured debt from 25.6% to ~2.6%, he says. This allows consumers to pay back expensive debt quicker. Interest on vehicle debt and balloon payments, which average 15.6%, can also be negotiated down and the period extended.

ALSO READ: One in three South Africans cannot pay their bills – survey

Debt-to-annual-income ratio declined

The Debt Index also found that the fourth quarter was the second quarter in a row that the median debt-to-annual-income ratio declined, although it is still high at 106%, indicating that consumers still experience the effects of the interest rate increases that began in November 2021 and remain elevated.

“Virtually everyone, 95% of those who applied for debt counselling during the quarter, had a personal loan and 24% had a short-term loan. This indicates that consumers supplement their income with short-term loans and personal loans have become a lifeline for many,” Sager says.

The subscriber base for free online debt-management tools increased by 82% in 2023 compared to the previous year. Given this interest in pro-actively managing debt DebtBusters added a Debt Sustainability Indicator to the tools it offers that calculates the proportion of income used to repay debt and offers practical tips on how to make it more sustainable.

The release of the data coincided with National Debt Awareness Month in February. The theme this year is focusses on financial sustainability to acknowledge the pro-active steps so many South Africans have taken to put themselves onto a better financial path.

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