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It's official – interest rates are no longer the biggest financial concern for many South African households. This recognition is now taking place due to the rising cost of living, with many people struggling to make ends meet.
The change is a central finding of Debtbusters' fifth annual Money Stress Tracker, which found that the cost of living has overtaken interest rates as the biggest source of financial stress for SA residents. Concerns about inflation rose 28% last year, while concerns about electricity costs nearly doubled, rising 99%.
Tomorrow, the Monetary Policy Committee (MPC) will announce its decision on whether to raise, cut or freeze lending rates, and economists are divided on whether the South African Reserve Bank (SARB) will keep or raise interest rates.
Citadel Global MD Bianca Botes believes the rand's resilience, improving fiscal metrics and continued structural reforms help keep rates unchanged. “If inflationary pressures persist, further tightening by South African Reserve Bank Governor Lesetsja Kganyago is possible,” he said.
Mike van der Westhuizen, CAM Asset Management portfolio manager, said low oil prices and a strong rand had helped ease inflation pressures, although geopolitical tensions remained a risk. He believes there is about a two-thirds chance that Governor Lesetja Kganyago will either announce a rate hike or take a more dovish stance.
Harry Scherzer, chief executive of FutureForex, said the MPC faced a balanced decision, with economists divided over whether to raise interest rates again or leave them unchanged. South Africa's prime lending rate is currently 10.5%.
Whatever decision the MPC takes, data from DebtBusters shows that consumers are concerned about more than just interest rates.
Bene Sager, executive head of DebtBusters, said, “Interest rates are no longer consumers' primary concern. The rising cost of living has come to dominate. The major source of concern has changed every year: inflation in 2022, interest rates in 2023, debt levels in 2024, a brief stabilization in 2025, and cost of living in 2026. What has remained constant is that short-term financial survival will be driven by large Long-term planning on a scale that eludes most South Africans”.
72% of respondents said they are experiencing financial stressWhile 42% said that financial pressures are affecting domestic life. This is the highest level recorded since the survey began five years ago.
While borrowing costs remain high, more and more consumers are grappling with a combination of rising food prices, electricity charges, transport costs and municipal charges, with their household budgets already stretched almost to capacity. One of the main stressors is the cost of electricity, which continues to rise.
More than 50% of the 18,000 survey respondents said more than 40% of their income goes to paying off debt. This leaves little room to absorb unexpected expenses or rising prices without making cuts elsewhere. The National Debt Counseling Association said many consumers have little or no disposable income after paying off debt and covering essential household expenses, leaving them vulnerable to even small increases in the cost of living.
These growing concerns are also having an emotional impact on South Africans, says clinical psychologist, Andrea du Plessis, “Financial stress is no longer an occasional challenge – it has become a constant psychological state. When we bring it into the home that is supposed to be our sanctuary, our safe space, we have no place anywhere where we feel safe”.
The findings show that consumers who have not yet been subject to debt review are becoming more willing to seek help before their financial situation gets worse. DebtBusters found that the proportion of respondents who said they would consider debt counseling rose from 36% last year to 40% this year.
This increase reflects what debt counselors are seeing, with more consumers seeking help not because of a financial shock, but after years of rising living costs that have gradually reduced their disposable income.
So, yes, when people see the increased cost of living as a crisis, they are not exaggerating.
(Source: IOL)