South African Households Show Modest Improvement in Q4 but Remain Under Financial Strain

Strategic Insights -

Households in South Africa experienced a slight improvement in their financial position in the fourth quarter of 2024, but real disposable income per person continued its decline from 2022 due to the interest rate-raising cycle. Economist Dr Roelf Botha attributed this modest improvement to three 25 basis point cuts in the repo rate between September 2024 and January 2025, which lowered the prime overdraft rate to 11% from a record high of 11.75%. Consumers also benefited from year-end bonuses, two-pot pension payouts, and temporary jobs in the holiday period, particularly in the tourism and retail sectors.

The Altron FinTech Household Resilience Index (AFHRI) revealed that households are not out of the woods yet, with the debt cost burden remaining high and preventing a more permanent recovery of household expenditure. Dr Botha emphasized that more substantial monetary policy easing is required to meaningfully improve household financial resilience, especially with diminishing global growth figures anticipated this year.

Key Takeaways:

  • The Altron FinTech Household Resilience Index (AFHRI) showed a slight improvement in households' financial position in Q4 2024, but still indicates real disposable income per person continued to decline from 2022.
  • The three 25 basis point cuts in the repo rate between September 2024 and January 2025 lowered the prime overdraft rate to 11% from a record high of 11.75%.
  • Consumers benefited from year-end bonuses, two-pot pension payouts, and temporary jobs in the holiday period, particularly in the tourism and retail sectors.
  • The ratio of household debt costs to disposable incomes declined from 9.1% to 8.9%, but remains significantly higher than the 6.8% level in 2021.
  • The cost of credit remains 31% higher than four years ago, affecting economic growth rate due to each increase in the repo rate.
  • The Monetary Policy Committee's decision not to lower the repo rate further in March 2025 was deemed regrettable, as several key economic indicators continue to show weakness.
  • The S&P Global Purchasing Managers' Index for South Africa fell to 47.4 in January 2025, and although it recovered to 48.3 in March 2025, has now been in contraction territory – below 50 – for four successive months, driven by weak demand.
  • Dr. Botha expressed concern about the decline in the values of building plans passed and buildings completed in the metros and larger municipalities.

Statistics:

  • The prime overdraft rate decreased from 11.75% to 11% between September 2024 and January 2025.
  • The ratio of household debt costs to disposable incomes declined from 9.1% to 8.9% between 2021 and 2025.
  • The cost of credit remains 31% higher than four years ago.
  • The S&P Global Purchasing Managers' Index for South Africa fell to 47.4 in January 2025 and recovered to 48.3 in March 2025.
  • The AFHRI four-quarter average has barely remained above the level recorded at the end of 2021.
  • The real disposable income per person continued to decline from 2022.

Sources:

  • Altron FinTech Household Resilience Index (AFHRI) release for the fourth quarter of 2024.
  • Statement from Dr Roelf Botha, economist, on the Altron FinTech Household Resilience Index.
  • Statement from Johan Gellatly, MD of Altron FinTech.
  • S&P Global Purchasing Managers' Index for South Africa.