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DebtBusters index shows increasing debt burden among South Africans

The 2021 debt index for the second quarter shows that although the debt burden is growing, debt counselling is working. Stock photo.
The 2021 debt index for the second quarter shows that although the debt burden is growing, debt counselling is working. Stock photo.

Compared to the same period five years ago, the debt-to-income ratio across all income bands in SA is now at 122% and has reached 152% for those taking home R20,000 or more.

That's according to DebtBusters’ 2021 Q2 debt index, which has tracked trends quarter-on-quarter over the past five years.

Data from the index shows the debt-to-net-income ratio is at an all-time high, but there is some good news with more people seeking help and a significant increase in those who have completed debt counselling.

“Consumers enquiring about debt counselling are spending about 60% of their take-home pay to service debt,” the report says.

“The level of unsecured debt continues to increase: the level of unsecured debt is on average 32% higher than in 2016 and up by 49% among consumers taking home R20,000 or more. This is a direct result of consumers using unsecured debt to offset the erosion of their take-home pay.”

In the second quarter, enquiries about debt counselling increased by 18% compared to a year ago. Head of DebtBusters Benay Sager attributed this to the after-effects of the nationwide lockdown and a narrowing of consumers’ ability to borrow.

Sager said debt levels had increased substantially and the number of open accounts had decreased for consumers applying for debt counselling, both of which indicate that consumers are seeking help sooner.

“The pool of consumers borrowing has also shrunk, as supported by National Credit Regulator data, which indicates average unsecured loan size has increased by 46% and the number of loans has decreased by 31% over the past four years,” the report says. 

The debt index also found that compared to the same period five years ago, real income was declining as inflation continued to biteNominal incomes were, on average, 3% higher than in Q2 2016, but when cumulative inflation growth of 24% was factored in, real incomes had shrunk by 21%.

Sager said despite all the bad news, which was perhaps unsurprising given the affect of successive lockdowns on an already struggling economy, some positive findings showed that debt counselling worked:

  • More consumers were completing debt counselling. There are now seven times as many consumers completing debt counselling as there were in 2016.
  • Consumers who completed debt counselling in Q2 2021 paid back R320m worth of debt to their creditors as part of the debt counselling process.

He said the fact that 56% of applicants for debt counselling were male was also positive. In Q2 2016 more women (52%) than men (48%) were applying for help to restructure their debt.

“In a society where men typically tended not to want to talk about or seek help with debt, it’s encouraging that men are becoming more proactive about dealing with debt problems.”


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