Middle class is too stretched to save and too ‘rich’ for help, index shows

SA’s middle class is not defaulting en masse — but behind closed doors, a quieter crisis is taking root.

According to a first-quarter debt index released by DebtBusters, households earning between R10,000 and R35,000 a month — which includes the backbone of the country’s working class — are cutting back on essential spending, including on children, vehicle loans, utilities, transport and food, just to survive.

These are workers who are too “rich” to qualify for social support, yet too stretched to save or invest. If they falter, however, the consequences could ripple beyond household budgets, undermining consumer demand, municipal revenues and even social stability.

The index report notes some consumers have tapped into the two-pot system to stay afloat — using early access to retirement funds as a stopgap to cover pressing expenses or pay off short-term debt. While this may have helped delay more severe credit distress it’s also an indication that households are exhausting future savings to survive the present.

“It’s clear that while consumers may feel a little more positive, personal loans, especially one-month loans, remain a lifeline for many, because income has not kept pace with rising expenses,” said Benay Sager, executive head of DebtBusters.

Among consumers earning R10,000–R20,000, vehicle loans account for 26% of their total debt. In the R20,000–R35,000 band, that figure climbs to 31%. This is occurring even as home ownership remains elusive with secured housing debt forming a much smaller share of their liabilities.

With interest rates on vehicle finance sitting at 14.9% a year, these loans have become expensive anchors — consuming a growing share of household budgets for assets that depreciate over time.

But it is not just secured debt putting pressure on consumers. 

Unsecured credit is also surging, especially among higher earners.

“For those taking home R35,000 or more, the unsecured debt levels were 90% higher — highest ever. In the absence of meaningful salary increases, it signals that consumers still need to supplement their incomes with unsecured credit,” Sager said.

After servicing debts — now requiring 69% of take-home pay on average — consumers have little left. Yet utilities such as electricity, water and rates and transport costs still consume about 25% of what remains.

This is particularly crushing in an environment where electricity tariffs have jumped 135% and petrol costs have soared 88% since 2016, far outstripping wage growth.

Sager said 91% of these consumers had a personal loan — a new record.

“A further 37% of consumers had a one-month [payday] loan — indicating that consumers continue to supplement their income with short-term unsecured credit, and personal loans, especially one-month loans, have become a lifeline for many.”

Food inflation further crowds out spending capacity, leaving virtually no room for insurance, savings or emergencies.

Sager noted that debt counselling enquiries were “a bit muted” compared with previous years. He attributed this to uncertainty about the macroeconomic environment, access to retirement funds and “some negative marketing against debt counselling”.

Consumers who applied for debt counselling in the first quarter of 2025 had 53% less purchasing power than consumers in 2016, the index found.

Though nominal incomes were just 1% lower than in 2016, the cumulative effect of 52% inflation over the nine-year period means their real incomes — what their money can actually buy — have dropped sharply.

There was slightly better news for higher earners. For those taking home R35,000 or more a month, nominal incomes have increased by 11% since 2016 — the first significant rise in years.

However, even for them, rising living costs have outpaced salary growth, and most consumers feel they are taking home far less in real terms than they did nearly a decade ago.

marxj@businesslive.co.za