The squeeze on the middle class: The more they earn the less they keep

THE house in the suburbs and the shiny new car might signal prosperity, but South Africa’s middle class is in a headlock of debt, with many households teetering on the brink of insolvency.

Benay Sager, executive head of DebtBusters, says increasing expenses have significantly outpaced income growth, and record numbers of consumers now rely on high-interest personal loans to make ends meet.

“In the last nine years, the average net income (take-home pay) of incoming debt counselling clients increased by 2% while inflation (CPI) went up by 49%. This means that in real terms most South Africans had 47% less disposable income in 2025 compared to 2016,” said Sager.

Revealing the results of their 10-year survey, Sager said that high-income earners - R35 000 and upwards - are using up to 85% of their take-home pay just to service loans. Personal and payday loans are also hitting record levels.

This means that if consumers were to pay back all their debts every month, they would need R85 out of every R100 they take home just to service this debt. He warned that this was not a sustainable situation for anyone. “Since the end of the pandemic, they've been the ones who've been able to borrow, and a lot of their family and friends also rely on them in terms of borrowing power. As a result, I think these ratios are completely out of line, and their debt-to-income ratio has shot up to 210%.”

The National Credit Regulator’s latest Consumer Credit Market Report paints a similar picture. Total outstanding consumer credit balances reached R2.43 trillion as of March 2025, up 0.98% quarter-on-quarter and 2.28% year-on-year. Mortgages, secured credit, and credit facilities all recorded increases in the debtor book, while unsecured credit and short-term loans showed modest declines. The number of credit-active accounts increased from 97.02 million to 101.26 million in the quarter ended March 2025. Meanwhile, impaired accounts rose slightly from 19.87 million (20.48%) to 20.68 million (20.42%).

Credit bureaus held records for 28.9 million credit-active consumers, up 1.01% from the previous quarter, with only 63% classified in good standing, highlighting growing strain across all income levels, even as the number of new credit agreements fell by 11.1% quarter-on-quarter.

Sager also highlighted the growing use of buy-now-pay-later products, which allow households to delay payments in the short term but add to their overall debt burden.

As middle-class borrowers struggle to service loans that rise faster than their paychecks, some have turned to online gambling in a bid to supplement cash flow, according to bank transaction data reviewed by DebtBusters. Repeated deposits into gambling apps - especially around paydays - indicate that many are using gambling as a coping strategy when wages can't keep the wolf from the door.

Sager said that almost every bank statement they received from counselling applicants shows the use of online gambling apps. “People tell themselves it’s entertainment, but it erodes the cash they need for essentials,” he said. In extreme cases, gambling transactions ranged from a few hundred rand to more than R20 000 to R30 000 over several months, excluding bank transaction fees.

Key to the problem, he said, is that salaries have not kept up with growing debt. However, for low-income earners, there has been some relief.

On Tuesday, Labour Minister Nomakhosazana Meth announced that the National Minimum Wage (NMW) rates for 2026 would increase from R28.79 to R30.23 per ordinary hour worked. Additionally, the extra R1.44 will benefit all workers, including vulnerable farm workers and domestic workers.

“March 1 is the date on which this amendment shall become binding,” said Meth. The National Minimum Wage is reviewed annually. It came into effect in 2019 and compels employers to pay workers a minimum rate per hour.