Nearly half of South Africa's one million credit-active youth have defaulted on their loans and repayments.
This is according to Consumer insights company Eighty20, which has analysed the credit behaviour of those between 18 and 24.
The analysis shows that with an average monthly income of R3,400 (less than half the national average of R7,000) and a youth unemployment rate of 62.4% according to Stats SA, financial strain is widespread in this age group.
Among the million credit-active youth, retail credit dominates, with 85% holding store accounts.
Personal unsecured loans follow at 17%, while 9% have credit cards.
Youth represent about 4% of South Africa's total outstanding debt, carrying R10bn in combined obligations.
But their credit performance is worse than the national average, with R1.1bn — or 11% of their total debt — currently overdue.
“South Africa's youth are grappling with deepening financial challenges, including crushing unemployment, limited asset ownership and mounting debt levels. With nearly 30m people under the age of 24, South Africa's economic future hinges on whether this generation can break the cycle of financial exclusion that currently defines their prospects,” said Andrew Fulton, Eighty20’s director.
He said the country faces a stark financial inclusion divide among young adults.
“While those under 24 represent about 20% of new credit market entrants over the past three months — a few hundred thousand individuals — this figure masks a deeper problem: many young South Africans never enter the formal credit market at all.”
This exclusion creates two distinct groups — those who successfully access credit can join the formal financial system and participate in the economy but many remain locked out, classified as “thin file” clients due to their lack of credit history.
“Without access to formal credit, these young South Africans are excluded from significant economic opportunities.
“A credit score serves as the gateway not only to lending products and favourable terms, but to essential services across multiple sectors.
“A healthy credit profile enables access to cellphone contracts, rental agreements and can even influence employment opportunities. Expanding credit access among young adults represents both individual economic empowerment and broader formal economy development,” said Fulton.
But a further challenge lies in the performance of those with credit — about half of young borrowers default early in their credit journey, with most maintaining high-risk credit scores.
“This pattern underscores the urgent need for enhanced financial education, and for those in distress to get into debt counselling early,” he said.
Marketing Research Foundation’s Marketing All Product Survey (MAPS) of 20,000 South Africans revealed the youth are more concerned about privacy when it comes to credit.
Many prefer that others do not know they are taking a personal loan and would prefer to take the loan from a financial institution rather than friends or family.
Harambee, an NGO focused on youth employment solutions, reported in its quarterly Breaking Barriers analysis that of the one million young people entering South Africa's labour market annually, only 40% find work in the short to medium term. Thirty percent find intermittent employment but remain mostly unemployed or outside education and training, 20% want to work but never find opportunities, and 10% stop seeking work altogether.
When it comes to generating extra cash, the youth are also turning to side hustles.
In addition, for those who have employment, side hustles have become essential to make ends meet.
BrandMapp, a survey of South Africans in households earning more than R10,000 monthly shows a notable shift.
In 2021, 55% reported having no side activities that create extra income, but this dropped to 49% in their most recent survey.
The survey asked for details on these activities, and the percentage of people who say they are running small businesses as a side hustle or taking second jobs in their primary field has grown by 50%.
This trend mirrors international patterns, with about 50% of millennials and 46% of Gen Z reporting side hustles.
The nature of these side hustles vary by demographic.
BrandMapp data shows that “home industry” activities are more common among black married couples, while temporary and shift work in restaurants and bars is more prevalent among white South Africans.
Other popular side hustles include freelance work in graphic design, writing and web development, e-commerce and drop shipping ventures [selling items online without holding inventory], ride-sharing and delivery services, content creation and monetisation, and online tutoring and teaching services.
“The intersection of limited formal employment, growing debt burdens, and the rise of alternative income sources creates both challenges and opportunities for South African youth.
“In the face of considerable financial headwinds, many young people are turning to side hustles as a means of creating opportunity in a tough economy, but with the right support structures and a focus on keeping their credit history clean, this generation has the potential to drive long-term, inclusive growth,” said Fulton.
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