A recent analysis has revealed that while South Africans earning more than R420 000 annually enjoy a more stable income, they are burdened with substantial debt. The findings come from a study conducted by DebtBusters, the country’s largest debt management company, based on data gathered from its clients. Despite earning well above the national average, these individuals are not financially secure, with debt repayments consuming the bulk of their income.
Key Takeaways
- High-Income Earners Are Trapped in Debt: Despite earning over R420 000 annually, many South Africans in this bracket allocate up to 74% of their take-home pay to debt repayments, largely due to home loans and vehicle finance. Their financial stability is more illusion than reality.
- Middle-Income Households Face the Greatest Pressure: Those earning between R10 000 and R35 000 are increasingly burdened by rising housing costs, inflation, and stagnant salaries. They are cutting back on groceries and other essentials just to cover basic living expenses.
- Retirement Savings Are Almost Non-Existent for Most South Africans: The overwhelming focus on debt repayment and high living costs means that only the top two income brackets save for retirement, leaving millions financially vulnerable in their later years.
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DebtBusters’ Study on Income and Debt Levels
The study categorised South Africans into five distinct income brackets: those earning below R5 000 per month, between R5 000 and R10 000, between R10 000 and R20 000, between R20 000 and R35 000, and those earning more than R35 000 per month. Across these groups, DebtBusters found that a significant portion of take-home pay is allocated to servicing debt. On average, South African consumers use 68% of their net income to meet debt obligations, highlighting the financial strain faced by many households. This means that before spending a cent on necessities like food, transport, or savings, most South Africans are already financially suffocated by debt repayments.
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High Earners Among the Most Indebted
DebtBusters’ quarterly report for Q4 2024 revealed that individuals earning more than R35 000 per month—equating to an annual income exceeding R420 000—are among the most indebted in the country. According to the report, this income group carries a total debt-to-annual-net-income ratio of 187%. More concerningly, they allocate 74% of their take-home pay each month towards repaying debt, the highest proportion of any income bracket. This effectively means that for every R100 they take home, R74 is already spoken for—leaving them with only R26 to cover all other expenses.
Following closely behind are those earning between R20 000 and R35 000 per month (R240 000 to R420 000 annually), who have a debt-to-income ratio of 137%. While these individuals are in a slightly better financial position, they still devote a significant share of their earnings to debt repayment.
With rising inflation and increasing living costs, these individuals are walking a financial tightrope, one unexpected expense away from serious trouble.
Home Loans and Vehicle Finance Drive Debt Levels
The study found that the primary contributors to the high levels of debt among those earning over R420 000 per year are home loans and vehicle asset finance. Many high-income individuals rely on credit to purchase property and cars, leading to long-term financial commitments that consume a substantial portion of their income. While home and vehicle ownership are often seen as markers of financial success, for many, they have become shackles—forcing them to live paycheck to paycheck despite their seemingly high salaries.
Benay Sager, the executive head of DebtBusters, noted that the study also provides insights into spending habits across different income groups. While higher earners have more stable financial plans, their budgets remain constrained due to significant debt obligations. Even with high incomes, they are not in control of their finances—most of their salary is already accounted for before it even reaches their accounts.
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How Spending Priorities Vary Across Income Levels
When debt repayments are excluded from the analysis, the report found that higher-income earners maintain more stable budgets compared to lower-income groups. Over the past three years, these individuals have experienced the least fluctuation in spending patterns. However, they continue to allocate a substantial portion of their income to medical aid, highlighting the growing cost of healthcare in South Africa. Medical aid contributions remain one of the largest expenses, proving that even well-off South Africans are feeling the squeeze of rising healthcare costs.
For lower and middle-income earners, spending habits vary considerably. Transport and electricity costs remain relatively consistent across all income brackets, but spending on accommodation differs significantly. Those earning under R5 000 per month allocate only 9% of their income to housing, while those in the R10 000 to R20 000 income range spend 31%—the highest proportion among all groups. This means that middle-income earners are disproportionately burdened with housing costs, often sacrificing other essentials just to keep a roof over their heads.
Grocery and Insurance Spending Reflect Economic Pressures
The study also highlighted notable differences in grocery spending across income brackets. Lower-income households dedicate a significantly higher share of their disposable income to food. Among the lowest earners, more than half of their non-debt-related income goes towards groceries. In contrast, for top earners, grocery expenses make up just under a quarter (23%) of their budget. This highlights the growing affordability gap, where the poor are forced to prioritise food over everything else, while higher earners have the luxury of discretionary spending.
Insurance, including medical aid, follows a similar trend. It is almost non-existent in the two lowest income brackets but becomes a more prominent expense among higher earners. Those earning between R10 000 and R20 000 allocate only 1% of their income to insurance, whereas top earners dedicate 13%. This stark contrast reveals that financial security is a privilege, not a given—those who need protection the most can least afford it.
Rising Costs Force Lower-Income Households to Cut Housing Expenses
With escalating electricity costs and food inflation, individuals in the lowest income bracket have had to adjust their spending habits to manage financial pressures. Over the past three years, the percentage of take-home pay spent on housing by this group has dropped from 20% to 9%, as they pool resources or seek more affordable living arrangements. For many, this means moving in with extended family, sacrificing space, or even relocating to lower-cost areas with fewer amenities.
In contrast, those earning between R10 000 and R20 000—who represent a large segment of the country’s working population—have seen their housing expenses increase. They now spend 31% of their take-home pay on accommodation, marking a 7% rise in just three years. To balance their budgets, many in this income group have reduced grocery expenses while allocating more funds towards their children’s needs. This shift indicates that middle-income families are bearing the brunt of economic hardship, forced to make tough choices between essential expenses.
Inflation and Stagnant Salaries Create a Financial Squeeze
Over the past decade, South Africans have faced steep increases in the cost of living. It is highlighted that inflation has surged by 144%, petrol prices have risen by 172%, and Eskom’s electricity tariffs have skyrocketed by 235%. Despite these sharp increases, salary growth has not kept pace, with most income brackets experiencing only a 98% rise in earnings over the same period. This gap between rising expenses and relatively stagnant wages is placing immense financial pressure on households across all income levels. In real terms, South Africans are earning less today than they did a decade ago, making it increasingly difficult to afford even the basics.
Retirement Savings Remain Neglected
Another concerning trend identified in the report is the lack of retirement savings among South Africans, particularly in lower income groups. It is noted that for those earning less than R20 000 per month, saving for retirement is virtually non-existent. Only the top two income brackets set aside a portion of their earnings for retirement, raising concerns about long-term financial security. With no savings cushion, millions of South Africans will be forced to rely on government grants or continue working well into old age, simply because they cannot afford to retire.
Sager emphasised that with the introduction of the new two-pot retirement system, there is a need for greater awareness and education around long-term financial planning. Without a shift in savings behaviour, many South Africans could face financial hardship in their later years.
Unless drastic changes are made, South Africa is heading towards a retirement crisis where the vast majority of people will be financially unprepared for their later years.
Conclusion
The DebtBusters report highlights the severe financial strain facing South Africans across all income levels, with debt repayment eating into disposable income and limiting financial security. Even those earning well above the national average are struggling to manage their obligations, while middle-income earners bear the brunt of rising costs. With salaries failing to keep up with inflation and essential expenses increasing, many households are left with little to no savings, particularly for retirement. Without urgent interventions—whether through financial education, better debt management strategies, or policy reforms—South Africa risks heading towards a widespread financial crisis where economic security remains out of reach for the majority.
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