Benay Sager, Executive Head of DebtBusters
South Africans’ wallets are getting a little healthier as declining interest rates, inflation, and fuel costs free up extra cash. This and access to some retirement savings could provide struggling consumers a lifeline, but only if they seize it.
Benay Sager, executive head of DebtBusters, says while the 25-basis point repo rate cut and a slight decline in inflation will provide some relief, it is not significant. However, taken with the 20% decrease in fuel costs since May, it will contribute to more disposable income for most consumers.
“This, and the ability to access some retirement funding will buoy consumer sentiment and enable them to improve finances. It also provides an opportunity to reduce unsustainable levels of debt that are particularly pervasive amongst consumers in upper-income brackets.”
DebtBusters’ most recent Debt Index for Q2 2024 found that those earning R35 000 or more a month spend 68% of their take-home pay on debt repayment. Debt-to-income ratios for top earners were at or near the highest-ever levels. For people taking home more than R20 000 a month, the ratio was 128%. For those earning R35 000 or more it was 167%. Neither figure is sustainable.
Sager says that although sentiment has improved, the environment is still difficult and uncertain. Consumers should focus on what they can control, so they are well-positioned to deal with setbacks as the economy recovers.
Average interest rates for unsecured debt are at an eight-year high of 26% per annum, and 82% of people who applied for debt counselling during the second quarter of 2024 had a personal loan.
He says that rather than getting swept up in the euphoria of Black Friday, year-end sales and the festive season, using some disposable income to pay off expensive debt will set consumers up for what may be an unpredictable 2025.
“Leading into the final quarter, a combination of positive developments has provided struggling consumers a rare window to improve their financial situation. Now would be a good time to take advantage of the opportunity.”
DebtBusters’ Debt Index for Q2 can be found in a previous article on EBnet here.
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