South African households are under significant financial strain, grappling with high inflation and rising unemployment, according to the latest Altron Fintech Household Resilience Index for the first quarter of 2025.
The report indicates that despite recent interest rate cuts, many families continue to struggle to make ends meet. It places blame on the restrictive monetary policy of the South African Reserve Bank (SARB) for a consistent decline in the average real disposable income for each South African.
While acknowledging that lower rates have provided some relief, the index detailed persistent financial pressures on households. It recorded a year-on-year increase of 2.5% in the first quarter of 2025, a figure that outpaces the national GDP growth rate, which remains below 1%.
Dr. Roelof Botha, economic advisor to Altron Fintech, was highly critical of the Monetary Policy Committee’s (MPC) approach, stating it is to blame for the current state of the South African economy. He echoed concerns raised by Altron Fintech Managing Director Ian Gelati, who pointed to a 4.2% quarter-on-quarter decline.
“A far more aggressive rate-cutting cycle is essential to restore household financial stability and stimulate the investment and consumer spending that drives our economy,” Dr. Botha said. He warned that high interest rates stifle the capital formation and private consumption expenditure vital for economic growth.
Dr. Botha further revealed he is involved in a research project to quantify the economic damage inflicted by the Reserve Bank’s restrictive policies.
This analysis comes as a joint macroeconomic standing committee, comprising National Treasury and SARB officials, is finalizing recommendations on an appropriate inflation target, which it deems critical for sustaining economic growth. This follows an announcement from the MPC that it prefers to target the lower end of the current range, at 3%, as opposed to the existing 3% to 6% band. The Reserve Bank has stated the wide target band carries challenges and long-term costs for the economy.
However, Dr. Botha issued a stark warning against such a move, calling a 3% target “extremely bad news for the South African economy.” He argued that current data makes such a low target unattainable and damaging, citing research from the Optimum Investment Group showing wage increases between 4% and 5% and administered prices rising at near double-digit rates.
“We are not a high-income country… We are an emerging economy,” Dr. Botha stated. “We will always… have a built-in supply side and exchange rate factor of probably between 1 and 3 percentage points on the inflation rate. So to go for a 3% inflation point, as far as I’m concerned, is ridiculous.”
He advocated for maintaining the current 3% to 6% range and adopting more flexibility towards the upper end of the band.
Looking ahead, Dr. Botha said the Household Resilience Index could see improvement in the second quarter if higher employment and lower interest rates are achieved, emphasizing that these two factors are desperately needed and work hand-in-hand to alleviate the pressure on South Africans.