South African middle class is in dire financial straits — here is who is suffering the most

According to the group’s Debt Index for the first quarter of 2022, nominal income has dropped somewhat two years following the commencement of the coronavirus pandemic. When the effect of cumulative inflation over the last six years is taken into account, South Africans have 31 percent less discretionary income in actual terms.

Consumers, according to DebtBusters’ Benay Sager, are making up the difference in real income by borrowing. Worse, inquiries concerning debt counseling climbed by 32% in the first quarter of 2022 compared to the previous year.

Unsecured debt levels are 20% higher than in 2016, and for people earning more than R20,000 per month, unsecured debt has climbed by 54%, which is unsustainable.

As a result of their increased debt burden, consumers must spend approximately 62% of their take-home pay to repay their debt.

Worryingly, debt-to-income ratios are at their highest levels in six years for the top two income bands. The ratio is 125% for individuals earning more than R10,000 per month and 150% for those earning more than R20,000 per month.

According to DebtBusters and National Credi Regulator (NCR) data, the average unsecured loan size increased by 27% over the last four years, while the number of new unsecured loans decreased by 13%, indicating that an ever-shrinking pool of customers were accepting unsecured loans.

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While the average new application age has remained stable, the number of applicants 45 and older has climbed from 19% to 24% in the last six years, showing that financial stress is becoming more frequent in this age group, according to Sager.

According to the Debt Index, the nature of debt is mainly consistent, with the exception of a growing amount from financed automobiles. Vehicle debt has climbed in recent years, indicating that more consumers with assets, particularly vehicles, are seeking financial assistance, according to Debt Rescue.

Banks account for exactly two-thirds of all debt (66%), with unsecured debt increasing slightly (7%) in the last year.