In 2020 the University of Cape Town found that the South African middle class declined from 6.1 million to 2.7 million between 2017 and 2020. That’s a 56% reduction. And the ultra-poor individuals have increased by 6.6 million individuals, a 54% increase. It is evident that the South African middle class is shrinking.
And it has gotten worse…
Over the past 2 years, the middle class have experienced high levels of unemployment and salary cuts due to Covid.
We are experiencing the highest unemployment rate in 12 years at 32% and it continues to increase monthly. More than 34% of South Africans are forecast to drop out of the middle class.
A third of the middle class will be whipped out
Analysts have pointed out that the ongoing lockdowns will have a disappointing impact on the middle class. Transaction Capital predicts that as much as a third of the middle class will be wiped out due to the various lockdowns.
Translation Capital analysed current credit statistics, wage data and unemployment figures to determine their forecast. The group said that overdue debt balances have continued to increase. Since 2020 debt balances have risen to more than a staggering R33 billion. And to make matters worse, according to their study, 38% of loans are in poor standing.
The study further showed that there are far fewer South Africans earning R22 000+, while significantly more South Africans are earning R8 000 or less.
A study on consumer debt found that those with R20,000 or more are spending over 60% of their monthly income to service their debt. Earlier this year TransUnion found that 46% of consumers are more than 3 months in arrears.
South Africans rely more on debt than ever before
The number of people in debt who rely on credit to simply stay alive has sky-rocketed.
The lockdown restrictions, salary cuts and the forever rising cost of living have made it almost impossible to stay afloat. As a result, many have relied on personal loans and credit card debt to help pay the bills.
Although all income groups have been hit by the harsh lockdown restrictions, data shows that middle-class earners have been hit the hardest. Those earning R20 000 or more have a total debt to annual net income ratio of 152%.
That means if you earn more than R20 000 per month you are likely to spend most of your income on debt repayments. Many of us have relied on debt to help us cope with salary cuts. We now have to deal with the consequences thereof. That can be difficult.
The National Credit Regulator has indicated that the average unsecured loan size has increased 46%.
Experian Africa revealed that the number of people defaulting on their loans has increased during the first quarter of the year.
Consumers are relying more on debt to help pay the bills than ever before.
How do you protect yourself financially?
Relying on debt to get by every month can be overwhelmingly stressful. You’re constantly worrying about how you’ll afford groceries, school fees, credit card bills, and paying off the car loan.
Experiencing constant stress can become very exhausting. It is well known that money problems can cause anxiety. This in turn leads to further health complications such as chronic headaches, diabetes and even cardiovascular disease.
With basic living expenses like food, fuel, utilities, childcare and healthcare on the rise, it’s important to review your budget regularly and to take note and act when your living expenses and debt repayments are matching up with what you can actually afford with your income.
Check out our post 5 Ways to Cope with the Shocking Cost of Living in South Africa (2021)
If you’re struggling with debt, and you’ve reduced your expenses to a minimum but still can’t get by every month, it may be time to consider legal assistance with your monthly debt.
Debt review is a statutory debt relief process governed by the National Credit Act (NCA) designed to protect consumers from losing their assets and essentially leaving them vulnerable.
You can’t rely on debt to help pay the bills every month…
As the #1 debt counsellor in South Africa, we have helped thousands of consumers get their financial situation back on track through the debt review process. We can help you too.
The benefits of debt review:
- Only pay one single reduced monthly debt repayment
- Legally protect all your assets
- No more harassment from creditors
- You’ll have more money available for monthly living expenses
With debt review, you can finally afford to pay off all your debt repayments while covering all your monthly expenses.
If you would like to take control of your financial situation, reach out to us by filling in the form below and one of our consultants will contact you shortly.
Or you can find out more about the debt review process here.