Consumer debt in 2024 shows how consumers still battle with cost of living

A snapshot of consumer debt in 2024 shows how much South African consumers still battle with cost of living expenses that leave them unable to afford the essentials without using credit. However, while the first half of 2024 was characterised by financial anxiety, there were positive signs that more consumers are tackling their burdensome credit although pressures remain.

Consumers got some relief in the second half of the year, with positive news about inflation, interest rates and load shedding, while access to retirement funds further buoyed consumer finances, with about two million pension fund members accessing their retirement savings since September 2024.

According to the Debtbusters Debt Index for the fourth quarter of 2024, demand for online debt management increased by 9% and debt counselling enquiries for the full year increased by 8% compared to the year before.

Benay Sager, executive head of DebtBusters, says the first half of 2024 was full of financial anxiety due to load shedding, high interest rates, high food inflation and worries about the upcoming national election.

He says the second half was one of financial relief with no load shedding, lower food inflation, relief about the formation of a coalition government and being able to access retirement funds under the two-pot retirement system.

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Consumers becoming proactive with debt

“The increasing use of online debt-management tools indicated consumers are becoming 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.”

The debt index also found that the fourth quarter was the second consecutive quarter where the median debt-to-annual-income ratio increased from all-time lows. Currently, this figure is 113%, indicating that consumers are still experiencing the effects of interest rate increases that began in November 2021 and despite some respite, remain elevated.

Sager says 82% of people who applied for debt counselling during the quarter had a personal loan and 52% had a one-month loan, indicating that consumers continue to supplement their income with short-term loans, while personal loans have become a lifeline for many people.

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Debt in 2024 compared to 2016

Compared to 2016, when DebtBusters began collecting and analysing data, consumers who applied for debt counselling in the fourth quarter of 2024 had:

• 42% less purchasing power. Although nominal incomes were 2% higher than eight years ago, when cumulative inflation of 44% is considered, in real terms, spending power is down by 42%.
• A higher debt-service burden. On average, before entering debt counselling, consumers spend 68% of their take-home pay to service debt. Those making R35 000 or more per month need 74% of their income to repay debts. The debt-to-income ratio for those earning R20 000 per month is 137% and 187% for people taking home R35 000 or more. For these income bands, the ratios are at the highest-ever levels.
• Unsustainably high levels of unsecured debt. Unsecured debt is, on average, 29% higher than in 2016. For those taking home more than R35 000 per month, it is 60% higher. This shows that in the absence of any meaningful salary increases, consumers are supplementing their income with unsecured debt.

Sager says the subscriber base for free online debt-management tools reached over a million in 2024.