September 27, 2023

5 Reasons Why South Africans Are Buckling Under Their Debt

South African Debt

South Africans across the income spectrum are struggling to pay their debts, with many under debt review. Many are being ably assisted by experienced professionals to shed the yoke of outstanding debt.

There are a myriad of reasons for this – the high cost of living, salaries not keeping pace with inflation, and even loadshedding. This has led to many retrenchments and companies downsizing or curtailing annual salary increases. 

There are, however, 5 key reasons why South Africans, both rich and poor, are buckling under their debt.

1. Increasing Interest Rates

Even the wealthiest South Africans are buckling under credit stress, especially those with home loans and vehicle financing.

High interest rates even stretch the budgets of affluent consumers as the repo rate reached its highest level since 2009. 

Read: Are Rate Cuts a Realistic Expectation for South Africans?

According to a recent report, the significant pressure consumers across the income spectrum were feeling toward the end of 2022 has only increased with the rising interest rates and a weakening Rand.

2. Inflation and Debt

Inflation is the highest it has ever been, and this further stress is applied to the majority of consumers through regular significant increases in both petrol and diesel prices.

This impacts not only car owners but has a severe knock-on effect on the price of other items such as food and transport.

Rising living costs inevitably influence the number of consumers forced to default on their 

debt payments. 

3. Rising Levels of Credit Card Debt

In 2022, Q4 saw a sudden 20% spike in the rate of new defaults year-on-year for credit card debt.

Average credit card overdue balances as a percentage of total balances for the middle class are now at 19%, compared to 8% for wealthier consumers. 

Read: More South African Households are Turning to Credit Cards

This is a sure sign that prevailing economic conditions are leaving struggling and more affluent South Africans alike spiraling into debt that they are finding harder to repay.

4. South Africans Living Beyond Their Means

It’s a well-known phenomenon that many South Africans live beyond their means. Expensive cars and spending heavily on credit not only means less money for savings but also pushes many South Africans further into debt. 

Financial literacy is a major stumbling block in promoting better savings behaviour, and with South Africans being poor savers due to lower disposable incomes, household debt levels increase at levels which, over time, become more difficult to manage.

5. Greater Responsible Lending Practices Required

An economy with a good financial situation associates with low debt levels in the household sector. 

To manage low debt levels among households, financial institutions which act as the primary source of credit in South Africa need to be more prescriptive and discerning when it comes to the provision of loans to customers. 

Read: South Africans Sink 65% of Their Salary into Debt

Greater discernment in granting credit in the first place would lead to fewer defaults in repaying debt.

Get in Touch with Debtline

With Debtline, even those facing a mountain of debt can experience the peace of mind of being debt-free within 60 months.

Debtline is passionate about helping all South Africans regain control of their finances by:

  • Standing to protect your assets and negotiating with creditors on your behalf
  • Providing you with an expert and experienced team of NCR-registered debt counsellors to assist you
  • Using our expertise and partnering with a national correspondence network of lawyers
  • Maintaining a strict level of confidentiality
  • Using our contacts established as South Africa’s most innovative debt management company 

Don’t delay. Regain your peace of mind and take the first step to being debt-free by contacting Debtline today.