Global Courant
South Africa’s middle class is facing serious financial problems, with more than 60% in unsustainable debt.
According to DebtBusters second annual Money Stress Tracker, three in four South Africans experience money stress, which has serious consequences for personal, work and health.
The tracker looks at how financial stress affects other aspects of life in South Africa, with more than 35,000 respondents to the 2023 survey, which is used as a representative sample of South African consumers who are not in debt counseling.
78% (2022: 70%) said they feel money stress, 94% say it affects their personal life, 78% their work life and 77% say it affects their health.
The study said women and those with lower incomes were the most stressed, while those earning more had high levels of unsustainable debt.
In addition, younger consumers and those on lower incomes were more likely to be looking for a higher-paying job, while younger consumers are 1.5 times more likely to set and stick to a budget.
Short-term concerns were the main reason for stress, with half of respondents saying running out of money before the end of the month was their top concern, despite falling from 52% in 2022 to 50% in 2023:
Main financial concern20222023Money running out before the end of the month52%50%Difficulty paying monthly debt36%44%Interest rate rising0%23%Unexpected expenses 24%22%Inflation and cost of living27%21%Impact on shedding expenses 0%17%School fees15%16%Pension 12%13% Source: DebtBusters’ Money Stress Tracker
Crisis for the middle class
Since 2022, the number of people who are afraid to pay off their monthly debt has increased enormously, from 36% in 2022 to 44% in 2023.
Overall, 70% of respondents said they spend more than 30% of their after-tax income on paying back debt.
The tracker also found that those who took home more than R20,000 a month had the greatest debt repayment pressures, with 62% of respondents reporting unsustainable levels of debt.
According to the study, this income group forms the backbone of the South African middle class.
“We advise consumers not to use more than 30% of their net salary to pay off debt. 62% of respondents in the top two income brackets we surveyed spend between 40% or more of their income on debt service. This is just too much, especially in a high-interest, high-inflation environment,” said Benay Sager, head of DebtBusters.
Interestingly, interest rate fears and layoffs have both increased from 0% in 2022 to 23% and 17% in 2023, respectively.
While all age groups said the biggest money stressor was running out of money before the end of the month, those over 55 also worried they wouldn’t have enough money to retire.
Those between 25 and 44 were more concerned about paying debt.
People between the ages of 25 and 44 were more concerned about paying off debt, with 44% saying it is their main financial concern.
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In terms of income group, those earning R5,000 or less per month were the most stressed about paying debts and school fees.
Those in the R20,000 to R35,000 – the backbone of the middle class – were most concerned about unexpected spending, inflation and cost of living and the impact of divestment
Those with the highest incomes – R35,000 or more – said they were most concerned about rate hikes.
“This indicates that the highest earners are feeling the impact of rising interest rates on their financial situation,” Sager said.
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