More South Africans are using loans to make up the shortfall between their income and the rising cost of living.
Though consumer confidence has improved and the rollout of the ‘two-pot’ retirement system has provided some financial relief, cash-strapped South Africans continue to use personal loans.
This is according to DebtBusters’ latest debt index report, which shows 91% of consumers who applied for debt counselling in the first quarter had a personal loan.
A further 37% had a one-month loan — also known as a payday loan.
“It’s clear while consumers may feel a little more positive, personal loans, especially one-month loans, remain a lifeline for many, because income has not kept pace with rising expenses,” said Benay Sager, executive head of DebtBusters.
Over the past nine years, electricity tariffs have increased by 135%, the price of petrol has risen by 88%, and the compound effect of inflation is 52%.
The report found consumers who applied for debt counselling in the first quarter of this year, on average, needed 69% of their take-home pay to service debt.
“This is a significant increase compared to previous quarters and the highest since 2017,” the report stated.
The most vulnerable consumers, taking home R5,000 or less per month, use 76% of their income to repay debt. Those earning R35,000 or more spend 77% servicing debt.
Sager said the ratios for these income groups are the highest since DebtBusters started analysing the data in 2016.
Compared with 2016, those consumers who applied for debt counselling in the first quarter of 2025 had 53% less purchasing power and a high debt service burden, with 69% of net incomes going towards paying debt.
The report showed most income bands have had to use 25% of their disposable income (after debt repayments) to pay for electricity, water, rates and transport. In addition, because of food inflation, many have had to spend more on food, which crowds out any room for insurance and assurance expenditure.
Unsecured debt levels were on average 34% higher than that of 2016 levels. While this is lower than inflation (CPI) growth, it needs to be looked at in the context of disposable income.
Sager said debt counselling enquiries were “a bit muted” compared with previous years, which he attributed to uncertainty about the macroeconomic environment and access to retirement funds.
John Manyike, head of financial education at Old Mutual, said with the economy showing signs of a turnaround, consumers must take advantage of improving conditions by reducing their high debt levels.
“Though external forces may derail progress, the current outlook for South African households is positive,” he said.
“A primary factor in the economic turnaround has been the decline in inflation over the past two years and the consequent reversal of the interest rate cycle.”
He advised South Africans to track their spending patterns by analysing bank statements and drawing up realistic monthly budgets.
“Prioritise your expenses according to your needs, not your wants. This will help you to cut non-essential spending.
“Try to pay off the full amount on your credit card each month. This type of debt has a high interest rate, and if you pay only the minimum required monthly amount, the balance owing builds up very quickly, with compounding working against you.
“The average household uses almost two-thirds of its income to service debt. That is unacceptably high — South Africans must learn to live within their means.”
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