Fixed salaries with limited-to-no-growth over the past few years; growing reliance on credit to cover day-to-day basics; and mounting social pressure to maintain a middle-class standard of living. These are some of the things putting pressure on SA’s middle class.
A R50,000 salary looks good but only on paper, notes Sebastien Alexanderson, head of National Debt Advisors, saying SA’s middle class lives “poorer in reality”.
“We’re seeing clients in this income bracket [between R30,000 and R60,000] who are completely overextended, not because they’re reckless, but because the cost of maintaining a normal life has skyrocketed. Many South Africans earning stable, even comfortable salaries are falling deeper into debt, driven by rising living costs, job-related financial pressure, and a social media culture that encourages overspending,” he says.
The inaugural Franc Wealth Index Report, which will be released on Wednesday to mark Financial Literacy Month, shows that debt is a major dividing line. “While debt management was the highest-scoring behaviour overall [6.6/10], 34% are over-indebted. This group has a median Wealth Index of 31, versus 53 for those with manageable debt, showing how damaging debt can be,” reads the report in part.
“There is clear potential for improvement. Although only 5.7% are thriving [scores above 80], around 22% scored between 50 and 65, meaning many people need only make one or two behavioural changes, such as better debt control, retirement planning, or regular saving, to improve their financial wellbeing.
“Earning more does not automatically make people less stressed. High-income earners with high debt scores often report anxiety levels similar to low-income earners. If you have low income, high debt and poor savings, the data says your anxiety is the correct signal for your situation. You are in the 51% majority, where stress is a survival mechanism.”
Alexanderson says geopolitical tensions are impacting SA’s fragile growth outlook. “What makes the current situation particularly severe is that much of the pressure is coming from outside SA’s borders but landing squarely in consumers’ pockets. We’re seeing a sharp increase in debt among consumers under 35. Buy-now-pay-later services, payday loans, and retail credit are being used to fund a lifestyle that isn’t sustainable.”
The report notes a “clear and compelling picture of financial wellbeing” in SA. “While awareness and intent are present, consistent financial resilience remains out of reach for many. With a median wealth index of 45, the data shows a population that is neither failing nor flourishing, but rather navigating a complex middle ground – making progress in some areas while remaining vulnerable in others.
“Encouragingly, many South Africans demonstrate elements of strong financial behaviour. A majority report manageable debt levels, a growing proportion engage in budgeting practices, and self-reported investment knowledge is relatively high. These are important signals of engagement and intent. However, this intent is not consistently translating into tangible financial security.
“The most critical gaps – emergency savings, retirement preparedness and consistent saving habits – highlight a systemic fragility. Financial resilience, the foundation upon which all long-term wealth is built, remains the weakest pillar. The Index also underscores the unequal distribution of financial wellbeing.”
The data also shows that income and education are strongly correlated with better outcomes, yet even among higher-income or more financially knowledgeable individuals, significant gaps persist.
Credit itself is neutral. It’s not the type of credit that’s at issue. What characterises it as good or bad is what it is used for, how much it costs, and whether the consumer can afford it.
— René Moonsamy, National Debt Counselling Association chairperson
“Over-indebted individuals and those without adequate emergency savings are materially worse off across almost every dimension, reinforcing how quickly financial stability can erode without strong foundations. Perhaps most notably, the data reveals that knowledge alone is not enough – there is a persistent gap between what people know and what they do.
Franc co-founder and CEO Dr Thomas Brennan says the report is the first step towards “building a shared language” for financial wellbeing. “One that individuals, employers, policymakers and institutions can use to better understand the challenges people face and the opportunities that lie ahead. By making financial wellbeing measurable, we believe it will also become more manageable.”
A few weeks ago, Sowetan reported on the many more people who were withdrawing from their two-pot savings for the third time.
National Debt Counselling Association chairperson René Moonsamy says: “The reality is that we’re going to see people borrowing more. In this context, understanding debt and the distinction between so-called good and bad credit is important.
“With consumers battered by a storm of rising costs, and April being Financial Literacy Month, now is a perfect time to explore the distinction. Credit itself is neutral. It’s not the type of credit that’s at issue. What characterises it as good or bad is what it is used for, how much it costs, and whether the consumer can afford it.”
Moonsamy says good credit is affordable. “[It is] well-managed and used for productive purposes that improve your long-term financial stability. For example, buying a car to get to work or generate an income, furthering your education or paying for a renovation to add value to your house.
“Payments should be affordable relative to your income, and the interest rates should be in line with a consumer’s risk profile… The problem is that while responsible lenders carry out all the required checks, desperate applicants can misrepresent expenses or income on the application. This is when borrowing becomes unaffordable, ‘bad credit’.
“Bad credit is unaffordable, high-cost or poorly managed borrowing, usually for short-term consumption that adds no lasting value. Examples include using credit to fund a lifestyle or basic living expenses or taking [out] new credit to repay old loans.”
