South African consumers are increasingly turning to two-pot withdrawals and credit to cover everyday expenses, raising concerns about long-term financial security and highlighting the growing affordability crisis facing households.
Recent research by DebtBusters found that consumers are spending more than 40% of their take-home pay on servicing debt, while an Old Mutual survey revealed that many families are using withdrawals from the two-pot retirement system to pay for essentials such as food and electricity.
The findings point to mounting financial pressure on households as the cost of living continues to rise, leaving many consumers struggling to balance monthly budgets.
Expense growth, not lifestyle spending
According to National Debt Counselling Association (NDCA) chairperson René Moonsamy, the trend reflects a broader affordability challenge rather than reckless spending habits.
“The reports highlight that the country is not faced with an issue of lifestyle overspending but rather expense growth,” said Moonsamy.
She warned that many consumers have become reliant on credit to bridge the gap between income and essential expenses.
“Credit should not become part of your monthly income. If you’re repeatedly borrowing to make it through the month, your financial commitments are not affordable,” she said.
The situation is further complicated by changes in the unsecured lending market. While the volume of unsecured loans has declined, the average loan size has increased, concentrating credit risk among a smaller group of borrowers.
Early warning signs for consumers
Moonsamy said the growing use of two-pot retirement withdrawals alongside short-term borrowing should serve as a warning signal for consumers to reassess their finances.
She noted that many households have become trapped in a cycle where they rely on additional sources of money every month simply to make ends meet.
“Recognising you have a problem and doing something about it is sensible, responsible, and the earlier you do it, the more options you will have,” she said.
“If you are at the point where you are using credit or retirement savings to make it through the month, that should be an early warning that you need to act.”
Debt counselling can provide relief
Moonsamy encouraged consumers who find themselves repeatedly relying on loans or retirement withdrawals to seek assistance before their financial situation deteriorates further.
She said debt counselling remains one of the most effective tools available to financially distressed consumers, allowing for the restructuring of obligations through revised repayment terms and, in some cases, reduced interest rates negotiated with credit providers.
The success of such arrangements, however, may depend on an individual’s credit profile and overall financial circumstances.
Exploring alternative solutions
Beyond debt counselling, Moonsamy said debt consolidation may also offer relief for some borrowers.
Debt consolidation combines several outstanding debts into a single loan, simplifying repayments and potentially easing the burden of multiple monthly debit orders.
While not a solution for every consumer, consolidation can help improve cash flow management and reduce financial stress when implemented responsibly.
As households continue to battle rising living costs, experts warn that drawing on retirement savings to fund day-to-day expenses may provide short-term relief but could create longer-term financial challenges if underlying affordability issues remain unresolved.
- South African consumers are increasingly using two-pot retirement withdrawals and credit to cover everyday expenses, with over 40% of take-home pay going towards debt servicing.
- The National Debt Counselling Association chairperson René Moonsamy stated that expense growth, not lifestyle overspending, is driving the affordability crisis.
- The average size of unsecured loans has increased despite a decline in loan volume, concentrating credit risk among fewer borrowers.
- Moonsamy advises that reliance on credit or retirement savings to cover monthly expenses is an early warning sign for consumers to seek financial help.
- Debt counselling and debt consolidation are recommended solutions to help financially distressed consumers restructure obligations and manage repayments more effectively.
