South Africa’s high interest rates over the past two years have increased the average debt cost burden to its highest level in 15 years, according to the Altron FinTech Household Resilience Index (AFHRI) for Q2 2024. Households now spend 9.1% of disposable income on debt costs, a 36% increase from 2022, when it was 6.7%. Economist Dr Roelof Botha attributes this rise to the South African Reserve Bank’s (SARB) “overly restrictive” monetary policies, which began in late 2021. The repo rate’s jump from 7% in 2021 to 11.75% in 2023 raised credit costs by 68%, stifling household spending and investment.

Botha argues that SARB’s focus on controlling inflation, driven by external factors like global shipping and fuel prices, rather than excess demand, has suppressed economic recovery after the pandemic. Had the debt servicing ratio remained at 6.7%, disposable incomes could have been R172 billion higher, boosting demand and potentially raising tax revenue by R42.9 billion—enough to build 370,000 homes and create 244,000 jobs.

The report also highlights rising unemployment, with 2.6 million more people, including discouraged job-seekers, unemployed since 2018. Despite private-sector employment gains of 459,000 in 2023, Botha and Altron FinTech MD Johan Gellatly call for lower interest rates to stimulate growth and reduce unemployment. Positive indicators include rising private-sector wages and investment potential, particularly following the JSE all share index reaching record highs.