What to do about debt


What can I do about my debt?

Experts say that South Africa should brace for massive job losses.

How did it happen that South African citizens acquired so much debt?

In 2007 controls concerning unsecured lending were eased to include previously disadvantaged people in South Africa also to be able to get loans approved. Instead of helping those in need, it led to a consumption-driven debt (people spending more than they earn) by those least able to pay back loans. Lack of financial literacy is seen as one reason why so many South Africans struggle to budget and turn to credit to make ends meet each month.

In an international study of 30 countries by the Organisation for Economic Co-operation and Development (OECD), South Africa performed the worst in financial competency, with the average financial literacy level sitting at just 30%.

African Bank, one of the biggest unsecured loan providers, went bankrupt in 2014. Capitec Bank is currently South Africa’s biggest unsecured lender.

A car loan and mortgage are the most common types of secured loan. Any collateral does not protect an unsecured loan. If you default on the loan, the lender can’t automatically take your property. The most common types of unsecured loan are credit cards, student loans, and personal loans.

Fast facts on debt in South Africa

  • According to the World Bank, South Africans are the biggest borrowers globally, with 86% of the debt population.
  • Ten million of those are behind on their payments.
  • 7.8 million of the country’s 60 million residents have taken out a combined R 225 billion of loans without collateral, primarily for short-term needs such as furniture and urgent family care.
  • 2/3 of customers pay more than 25% of their net income to service their loans.
  • Many find themselves in debt because they lack financial education.  They are lured by banks, cell phones companies and furniture and clothing stores into making loans, acquire credit cards with increasing overdraft facilities and buying things they can’t afford.
  • Many people are lured into pyramid schemes to increase their money fast, and they always lose all of their investments.
  • ‘’Black tax’’ is part of the problem, as young black graduates are expected to pay monthly to help support their families instead of just taking care of themselves.
  • Salaries in South Africa do not keep up with inflation. People have more minor to live on year by year. The extreme indebtedness of miners was seen as one of the root causes of violent labour unrest that culminated in 34 strikers at Marikana.
  • Two-thirds of the mining industry’s 450 000 workers have had unsecured loans and spend an average of 48 % of their wages paying off debt,
  • Unemployment has reached an all-time high, with 29% of South African citizens out of work.

How do people react to debt?

Stress, rage, anxiety and suicidal tendencies are seen in people who are struggling with crippling debt. Often parents are considering a family suicide, not wanting to leave their children behind.

If you have any of these symptoms, please ask for help. There is help available from counsellors, debt counselling, and the National Credit Regulator.

New legislation aimed at helping those in debt

President Cyril Ramaphosa, in August 2019, signed the National Credit Amendment Act into law, setting the groundwork for over-indebted consumers to have payments suspended, in part or whole, for as long as 24 months, or even scrapped if their financial situation has been found to have worsened.

You will have to apply – and there’s a deadline.

Debts will not be written off automatically. You will have four years from when the bill takes effect to apply to the National Credit Regulator to have your debts written off. They will look at your income and amount you owe. The law applies to customers who earn a gross monthly income of no more than R 7 500, have unsecured debt amounting to R 50 000. They decide whether your situation is desperate enough.

The exact details still need to be finalised, but this was how the government outlined the proposed process last year:

After applying with the NCR, its “debt intervention officers” will consider your case and inform your creditors and credit bureaus that you have applied.

The NCR will go through your finances to determine if you are over-indebted and whether some of your creditors were “reckless” in extending debt to you. (This means that they shouldn’t have granted you a loan that you couldn’t afford at the time.) The NCR will take action against offending creditors. But even if you weren’t the victim of reckless lending, you will still be considered for debt relief.

The NCR will also provide you with some financial education.

Then, the NCR will determine whether you can pay off your debts within five years. If they find that you can settle your debts, your application will be rejected.

If it’s determined that you won’t be able to settle it without intervention, all or some of your debt repayments may be suspended for up to a year.

Eight months later, the NCR will take another look at your finances. If you can repay your debts within five years, the tribunal will consider rearranging your debts (lowering interest or extending loan periods). If you’re still not in a position to pay off your debts, you may get another twelve repayment-free months. If, after another eight months, the NCR find that you still can’t pay off your debts, your debts may be written off – all of it or a part of it.

How long before a debt is written off in South Africa?

Prescribed debt refers to the debt that the creditor has not recognised or paid for more than 36 months. This is considered senior debt by creditors and may then be written off.

Please note: You cannot go to jail for not paying your debts when there is a judgment against you. You can, however, be liquidated, sequestrated, an emoluments attachment order placed on your salary or your assets attached

What happens after your debts are written off?

If your debt were written off, you wouldn’t be able to apply for credit for up to a year. Your credit record will also reflect that you had debt is written off, which might prevent you from getting credit in the future.


Debt Warning Signs Quiz

Get help


You can chat with an online counsellor on our helpline: LIVE CHAT.

It is a text-based chat and you may remain anonymous.


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