Local household resilience is improving, with recent rate cuts providing some relief, but interest rates remain relatively high and, combined with global uncertainty, continue to weigh on South African consumers.
According to the Altron FinTech Household Resilience Index (AFHRI), households saw modest relief in 2025, with a 2.1% year-on-year improvement in the third quarter, roughly matching GDP growth.
Despite this, household resilience has grown only slowly in recent years. Since just before the Covid-19 pandemic, real household resilience has increased about 0.6% annually, slightly below the average GDP growth of 0.7%.
Since the AFHRI’s 2014 base, the index has averaged 1.2% growth, but households have lagged since interest rates began rising in 2021. “The latest AFHRI results show that although financial pressure on households remains real, the gradual improvement we’re seeing is an encouraging sign that relief is beginning to take hold,” said Johan Gellatly, MD at Altron FinTech.
“Lower interest rates are starting to create space for recovery, and we expect this positive trajectory to strengthen as market conditions stabilise.”
The AFHRI tracks 20 indicators tied to income and asset values, weighted for short-term lending demand and adjusted for inflation since its 2014 first-quarter base.
It has an immediate and profound impact.
— Roelof Botha, economic adviser for Optimum Investment Group
In the latest quarter, 14 indicators rose year on year and 15 quarter on quarter, with modest gains in private sector employment, slightly lower real salaries, record-high unit trust assets, and a stronger income-to-debt ratio following the 10.5% rate cut.
Additionally, the implementation of the “two-pot” system in 2024, which allowed early access to retirement savings, has boosted household liquidity. The AFHRI reported annuities up 9.3% year on year and long-term policy surrenders up 22.5% quarter on quarter in the 2025 quarter, with R95.3bn withdrawn, 42% above the previous ten-quarter average.
Roelof Botha, economic adviser for Optimum Investment Group, highlighted the effect of interest rates on household resilience. He noted that when the prime rate fell to 7% in mid-2020, the AFHRI rebounded from 104.1 to 113.8, while subsequent hikes to 15-year highs weakened resilience until rates eased.
“It has an immediate and profound impact,” Botha said, noting that for South African households, as the prime rate falls, the number of mortgage bond applications with leading home loan brand BetterBond tends to rise, and vice versa.
This inverse relationship is also reflected in the AFHRI.
Botha argued the Reserve Bank missed an opportunity to further cut rates in January. He noted that while South Africa’s 10-year government bond yield has fallen more than 250 basis points since April, the prime rate has dropped only about 100 basis points, keeping borrowing costs unnecessarily high. “Interest rate and repo rate should be lowered in line with the 10-year bond yield,” he said
Amid global economic uncertainty after the escalation of conflict in Iran, Botha warned that rising oil prices could complicate the interest rate outlook. But he stressed that in South Africa, where unemployment is a bigger concern than inflation, a rate increase should be avoided.
“My biggest concern is the possibility of a rate increase. But for the time being, if they can hold rates steady, that would be acceptable,” he said, suggesting cuts could resume a few months later if conditions stabilise.
With most economists forecasting sub-2% GDP growth in 2026, Botha argued that more aggressive rate cuts are crucial to revive growth and support employment. He highlighted that South Africa’s formal jobs now match the 11.6 million unemployed, a situation he described as “frightening”.
To address this, Botha pointed to a 2025 World Bank roadmap aimed at unlocking inclusive growth and creating jobs in South Africa, produced through a demand-driven process agreed upon in early 2023 between the government and the World Bank.
The roadmap recommends that the public sector match private sector efficiency to sustain high growth. “If government just implements the World Bank roadmap, which they requested, then they’re home and dry,” he said.
Botha emphasised the role of entrepreneurship and small businesses in tackling unemployment. “As far as I’m concerned, the most important factor of the lot is entrepreneurship,” he said, noting that entrepreneurial activity generates far more economic output than traditional employment.
On supporting small businesses, he added: “Apart from infrastructure, the other thing that needs to happen is deregulation. They have to try a little bit harder to make it easier for businesses to do business.”
Botha referred to the 2026 Budget Speech, in which the compulsory VAT registration threshold will rise from R1-million to R2.3-million in annual taxable turnover, effective 1 April 2026, giving small businesses more breathing room to focus on growth. “There’s just so much red tape, and lifting the VAT registration threshold is a step in the right direction,” he said, stressing that further reforms should be implemented with the private sector to streamline regulations.
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