Credit Users in South Africa Face New Warning

Experts have cautioned that South Africans are increasingly falling into a debt trap, where credit is being used less to finance long-term assets and more to cover everyday living costs. Instead of taking out loans to purchase property or expand businesses, consumers are relying on borrowed money simply to get through each month.

Key Takeaways

• The debt trap is deepening: South Africans are increasingly using credit to cover basic survival costs like food and electricity rather than to build assets, with borrowers taking on new debt just to service existing repayments.
• The real crisis is bigger than reported: A significant chunk of consumer debt, owed to family, stokvels and unregistered lenders, never reaches formal credit bureaus, meaning official financial stress figures likely understate how bad the situation actually is.
• Banks need to change course voluntarily: Experts argue banks must reform lending incentives, restrict credit marketing to over-indebted customers, and start measuring success by long-term customer financial health rather than loan volumes, before regulators force the issue.

Credit Increasingly Used for Survival Rather Than Growth

The Head of the Department of Actuarial Science at the University of Pretoria, Conrad Beyers, has cautioned that household debt is turning into a full-blown crisis, with working South Africans borrowing more and more just to stay afloat.

According to Beyers, credit is being used less and less to purchase houses or establish businesses, and instead is going towards covering food, electricity bills and settling existing debt. He explained that individuals are forced to borrow again simply to keep up with repayments on debt they have already taken on, creating a repeating cycle that is difficult to escape.

Rising Financial Stress Across South African Households

Figures from the Old Mutual Savings and Investment Monitor 2026 show that a significant proportion of the population is under considerable financial pressure.

• Around 40% of respondents reported experiencing significant financial stress
• This figure climbs to 47% among people earning below R30 000 per month
• Roughly half of those surveyed said they frequently worry about their level of debt
• Growing numbers of people are turning to gambling and informal, unregulated borrowing as a coping mechanism

Income Bracket	Reported Financial Stress
Overall respondents	40%
Earning under R30 000 per month	47%
Frequently worried about debt levels	Roughly half of all respondents

Hidden Debt Makes the True Situation Worse Than It Appears

Beyers pointed out that the real extent of the problem is likely far more severe than official figures suggest, since a considerable portion of consumer debt never reaches formal credit bureaus and therefore goes unrecorded.

He noted that the true position may be considerably worse than reported, as money owed to family members, stokvels and unregistered lenders remains completely invisible to the credit bureau system. This means that official statistics only capture part of the picture, leaving a large portion of household debt effectively hidden from regulators, banks and even researchers.

Beyers further explained that some households only appear to be up to date with their obligations because they are continually taking out new credit or delaying other payments to stay afloat. He warned that financial collapse is typically only recorded at the very end of a long debt spiral, by which point the household in question has already become deeply trapped in a cycle it cannot easily reverse.

Banks Criticised over Use of Financial Inclusion as a Marketing Term

Beyers was strongly critical of the way banks have used the concept of financial inclusion, describing it as little more than a marketing buzzword employed to justify extending more debt to households on lower incomes.

He argued that banks cannot expect to remain financially healthy in the long run while the very people and businesses that support them become increasingly indebted and progressively less able to absorb even a minor financial setback.

Real Financial Inclusion Should Help People Save

Beyers explained that genuine financial inclusion ought to help customers build up resilience over time, rather than being used as a mechanism to exploit their financial vulnerability.

He said that the end result of this so called inclusion is frequently that a growing share of a person’s salary is swallowed up by interest charges and repayments, without any corresponding increase in their assets or overall financial security.

Beyers added that authentic financial inclusion should instead help people to save money, build up assets, launch businesses and become progressively stronger financially as time goes on. He stressed that success in this area cannot simply be measured by counting the number of accounts opened or loans granted, since these figures say nothing about whether customers are actually better off.

A Short-Sighted Lending Model

Beyers identified one of the central causes of the crisis as the way in which bank incentive structures reward short-term lending over investment in genuinely productive activities. He compared this approach to a short-sighted strategy resembling a snake consuming its own tail, since it generates immediate rewards while steadily undermining the very foundation it depends on.

He explained that banks continue to collect interest and fees from households that are already financially exhausted, all while gradually wearing away at the broader economic base that ultimately sustains those same banks. Beyers argued that a lending model of this nature is fundamentally flawed if it rewards an institution in the present for decisions that will leave its future economic base measurably weaker.

How Banks Can Address the Crisis

Beyers said that banks themselves must take the initiative to reform their lending criteria, incentive structures and product offerings before regulators or government are forced to step in and impose changes from the outside.

He set out several practical steps that banks could take to address the growing crisis:

• Use existing customer data proactively to identify signs of financial distress at an early stage
• Offer early restructuring options, fair debt consolidation and lower-cost refinancing instead of pushing another expensive loan onto struggling customers
• Stop actively marketing new credit products to customers who are already over-indebted
• Make saving money and reducing debt at least as straightforward and accessible as increasing a credit limit
• Direct more capital towards viable small businesses, equipment purchases, housing and infrastructure projects that generate genuine income and employment, rather than concentrating primarily on consumer spending

Judging Bank Performance over the Long Term

Beyers urged bank boards to reconsider their internal targets and to start judging their own performance according to whether their customers are demonstrably financially stronger three to five years down the line, rather than focusing purely on short-term lending volumes or account growth.

Conclusion

South Africa’s rising reliance on credit to cover everyday expenses points to a debt crisis that runs deeper than official figures suggest, with hidden borrowing through family, stokvels and unregistered lenders masking the true scale of household financial distress. While banks have profited from this cycle of repeated borrowing, experts warn that the model is ultimately unsustainable, since a financially exhausted customer base weakens the very economy banks depend on. Addressing the problem will require banks to move beyond financial inclusion as a marketing term and genuinely prioritise customers’ long-term financial resilience, through early intervention, fairer restructuring options and a shift in capital towards productive investment, rather than continuing to extend credit to households that are already struggling to cope.