Outstanding debt

Outstanding Debt, in its simplest form, is the total amount of debt that remains unpaid by the borrower. This can refer to individuals (like you and me), companies, or even governments. Whether it’s the mortgage on your house, the loan taken for your child’s education, or the credit card bill from last month that is still unpaid, it all counts as outstanding debt.

Key Takeaways

  • Understanding Outstanding Debt: Outstanding debt refers to the amount of borrowed money that has yet to be paid back to the lender. It is a critical financial aspect that impacts individuals, businesses, and governments.
  • Legal Aspects: South Africa has several laws in place to manage outstanding debt and protect consumers, including the National Credit Act, Debt Collection Act, and Bankruptcy laws.
  • Debt Management Strategies: Strategies to overcome outstanding debt include personal financial management, debt counselling, and debt consolidation. These tools can help individuals regain control of their financial situation.
  • Role of Financial Institutions: Banks, micro-lenders, non-bank financial institutions, and credit bureaus play a pivotal role in managing outstanding debt in South Africa, offering credit products and services that, if not managed correctly, can lead to escalating debt.

The Debt Landscape in South Africa Today

Overview of Current Debt Statistics

South Africa’s debt landscape today is shaped by its historical legacy and contemporary economic challenges. As of the second quarter of 2023, the government’s debt-to-GDP ratio hovers around 80%. Meanwhile, the household debt-to-income ratio is still alarmingly high, currently sitting at about 73%.

Key Drivers of Outstanding Debt

Several factors are driving the rise in outstanding debt. On a macro level, stagnant economic growth, high unemployment rates, and inflationary pressure are significant contributors. On a micro level, low financial literacy, high cost of living, and irresponsible lending practices are further exacerbating the issue.

The Role of Government

The government plays a crucial role in managing the country’s debt. Through various economic and fiscal policies, the government aims to control inflation, stimulate economic growth, and promote responsible lending practices. However, achieving these goals remains a challenge due to the complex socio-economic landscape of South Africa.

However, a failing power utility puts the Government on the back foot, forcing many small and medium businesses to spend exorbitant amounts of capital on generating power and ultimately leading to bankruptcy

Different Types of Outstanding Debt

Personal Debt

The most common types of personal outstanding debt in South Africa include mortgages, student loans, credit cards, and payday loans.

Mortgages: Buying a home is often the most significant financial decision most people make. Consequently, it is also a significant source of debt. With the high cost of property and high interest rates, many South Africans find themselves struggling to keep up with mortgage repayments.

Student Loans: Higher education is expensive, and many students need to take out loans to afford it. These loans then become a long-term financial burden that takes years, sometimes decades, to pay off.

Credit Cards: Credit cards provide a convenient way to make purchases. However, if not managed wisely, they can quickly become a source of escalating debt due to high-interest rates and fees.

Payday Loans: These are small, short-term loans designed to cover a borrower’s expenses until their next payday. They usually come with high-interest rates and fees, making them an expensive form of credit.

Corporate Debt

Corporations, just like individuals, also incur debt. This is usually in the form of loans from financial institutions or through issuing bonds. While debt can help corporations fund expansion and growth, it can also lead to financial instability if not managed correctly.

Government Debt

Government debt is the money owed by the national government to its creditors. It can be a result of borrowing from international lenders, issuing bonds, or borrowing from the country’s citizens. While it can be used to fund infrastructural development and stimulate the economy, high levels of government debt can be a cause for concern.

The Impact of Outstanding Debt on the South African Economy

The Macro-economic Implications

South Africa’s high levels of outstanding debt, both at the individual and governmental levels, have macroeconomic implications. High household debt can lead to decreased consumer spending, which is a critical component of GDP. As households channel more income towards debt repayment, there’s less to spend on goods and services, which can slow down economic growth.

Furthermore, high levels of government debt can have several repercussions. Firstly, the government may need to increase taxes or cut back on public services to service the debt. Secondly, a high debt-to-GDP ratio can deter foreign investors, leading to reduced foreign capital inflow. Lastly, it may lead to increased borrowing costs if lenders perceive the country as a high-risk borrower.

The Socio-economic Consequences

High levels of debt can also have severe socio-economic consequences. Over-indebted households often have to cut back on essential expenses such as food, healthcare, and education. This can lead to increased poverty and inequality.

Moreover, stress from unmanageable debt can lead to mental health issues. Research shows a clear link between high levels of debt and increased rates of depression and anxiety. Over time, this can impact productivity, further aggravating the economic impact of debt.

South African Legislation and Outstanding Debt

National Credit Act

The South African National Credit Act (NCA) was established in 2005 as an effort to protect consumers from predatory lending practices and to prevent over-indebtedness. The NCA regulates credit providers, ensuring they lend responsibly. It also provides recourse for consumers who believe they have been unfairly treated.

Debt Collection Act

The Debt Collection Act regulates the process of collecting debts in South Africa. It sets out the rights and obligations of both creditors and debtors and provides a framework for fair and ethical debt collection practices.

Bankruptcy Laws

In South Africa, bankruptcy laws provide a means for individuals and businesses unable to pay their debts to either liquidate their assets to pay their creditors or create a repayment plan. These laws offer a lifeline to over-indebted individuals or businesses, but they also come with serious consequences, including a negative impact on credit scores and future borrowing ability.

Managing and Overcoming Outstanding Debt

Personal Financial Management Strategies

Effective personal financial management strategies are crucial for managing and overcoming outstanding debt. These may include budgeting, debt consolidation, or seeking advice from financial advisors. Establishing a clear plan can help individuals regain control of their financial situation and reduce their debt over time.

Role of Debt Counselling

Debt counselling is a process in which a debt counsellor assesses an individual’s outstanding debt and implements a restructured debt repayment plan. It’s a well-structured and legal process that provides a lifeline to South Africans who are struggling with debt.

Debt Consolidation and Debt Review

The Debt consolidation process allows consultants to combine all you debt into a single payment. A lower interest rate all also be negotiated with creditors. It can simplify debt management and reduce monthly payments. However, it’s essential to understand the terms and conditions of debt consolidation to ensure it is a beneficial strategy.

» Read more: Strategies to become debt-free!

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The Role of Financial Institutions

Banks and Micro-lenders

Banks and micro-lenders play a critical role in South Africa’s outstanding debt scenario. Banks provide a wide range of credit products, from home loans and personal loans to credit cards and overdraft facilities. While these products can help individuals and businesses to finance their needs, they can also lead to escalating debt if not managed responsibly.

Micro-lenders, on the other hand, typically cater to lower-income individuals who might not have access to traditional banking services. While they provide essential financial access, they often charge high-interest rates, and if unchecked, can lead to a cycle of debt.

Non-Bank Financial Institutions

Non-bank financial institutions such as insurance companies, mutual fund companies, and pension funds also contribute to the outstanding debt environment. They often invest in government and corporate bonds, which indirectly contribute to debt levels. Moreover, products such as life insurance and annuities, which they offer, often involve long-term payment commitments and can contribute to personal debt.

Credit Bureaus

Credit bureaus play a pivotal role in managing outstanding debt in South Africa. They collect information about individuals’ credit behaviour and compile this into credit reports, which are used by lenders to assess creditworthiness. A poor credit score can limit access to credit and result in higher interest rates.


While the situation is undoubtedly challenging, there are tools and strategies available to manage and overcome outstanding debt. From legislation and government policies to personal financial management strategies and support from financial institutions, there are many resources that South Africans can tap into. Understanding outstanding debt is the first step towards managing it effectively and ultimately achieving financial stability.

Frequently Asked Questions

What is the difference between outstanding debt and bad debt?

Outstanding debt refers to the total amount of debt that is yet to be paid. It can be in good standing if payments are being made on time, or it can be in arrears if payments are overdue. Bad debt, on the other hand, is debt that has been written off by the lender as unlikely to be collected.

How can I reduce my outstanding debt in South Africa?

There are several strategies for reducing outstanding debt. These include budgeting, debt consolidation, increasing your income, reducing your expenses, or seeking help from a debt counsellor.

How does the National Credit Act protect consumers?

The National Credit Act protects consumers by regulating credit providers and ensuring they lend responsibly. It also provides recourse for consumers who believe they have been treated unfairly.

What are the consequences of not paying debt in South Africa?

Failing to pay your debt in South Africa can lead to severe consequences, including a negative impact on your credit score, legal action, and seizure of assets. It can also lead to mental stress and financial insecurity.

What help is available for individuals struggling with outstanding debt in South Africa?

There are numerous resources available to those struggling with debt in South Africa. These include debt counselling services, financial advice from banks and financial institutions, government support programs, and consumer protection agencies.

How much do you need?
*Representative example: Estimated repayments of a loan of R30,000 over 36 months at a maximum interest rate including fees of 27,5% APR would be R1,232.82 per month.

Loan amount R100 - R250,000. Repayment terms can range from 3 - 72 months. Minimum APR is 5% and maximum APR is 60%.