NDCA warns credit and two-pot withdrawals signal affordability problems
Contrary to perceptions that lifestyle overspending is why many South African households struggle to make it through the month, the real reason is that after paying for essentials and servicing debt, there’s simply no money left.
An Old Mutual survey of 35 000 clients indicates that claimants are increasingly using the two-pot retirement system to cover basic expenses such as food, electricity, rent, school fees, or to help family members.
At the same time, household debt is increasing. According to the South African Reserve Bank, it rose to 62.2% of disposable income in Q1 2026, up from 61.8% in the previous quarter.
A recent survey by DebtBusters of 18 000 consumers showed that 53% of respondents were spending more than 40% of their take-home pay on debt repayments, up from 48% last year.
“This all points to the real problem being income growth that hasn’t kept pace with expense growth, rather than a lifestyle overspending issue. People can’t make ends meet and so are dipping into retirement savings or borrowing to make up the shortfall,” says René Moonsamy, National Debt Counselling Association (NDCA) chairperson.
She says using retirement savings can provide relief in a genuine financial emergency. When this money is used to cover daily living expenses, there is an underlying cash-flow problem.
The same is true when households rely on credit for groceries, municipal rates, electricity, school fees and daily expenses.
Often, using credit to cover a temporary shortfall can start a cycle of borrowing, that eventually results in a situation where 40% or more of take-home pay is needed to repay debt. Most debt counsellors consider this unsustainable.
“Credit should not become part of your monthly income,” says Moonsamy. “If you’re repeatedly borrowing to make it through the month, your financial commitments are not affordable.”
She says that when faced with this situation, the best place to start is by finding out where the money is going and looking for opportunities to cut back on spending or renegotiate some costs.
But as the numbers indicate, many households have already cut their monthly budgets to the extent that they’re forced to rely on retirement savings or debt to pay essential expenses.
That’s when restructuring can help, including debt consolidation and debt counselling.
Debt consolidation combines multiple debts into a single loan with one monthly repayment. It can save on service fees and credit life cover costs, putting some money back into consumers’ wallets. Depending on the applicant’s credit score, interest rates may be lower than credit cards or retail accounts. But the total cost of the loan must be considered, as interest is usually paid over a longer period.
While it can provide some breathing room, debt consolidation doesn’t necessarily solve an underlying affordability problem.
For over-indebted consumers, debt counselling provides an effective way to restructure debt and regain control of their finances.
A registered debt counsellor assesses the consumer’s income, living expenses and credit commitments to determine whether they are over-indebted. If they are, the consumer’s credit agreements can be restructured into a repayment plan based on what they can realistically afford.
Through negotiations with credit providers, interest rates may be reduced and repayment periods extended. Instead of trying to manage multiple unaffordable repayments, the consumer makes a single monthly payment that is distributed among their creditors.
The process is not a quick fix. But the purpose is to provide something that a cycle of borrowing cannot.
“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. 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,” says Moonsamy.
