As we reach the halfway mark of 2025, South Africans are navigating a mixed financial landscape. On one hand, petrol prices are down, inflation is easing, and interest rate cuts are on the cards. But on the other, thousands of workers are tapping into their retirement funds just to stay afloat, with many drowning in debt despite recent salary increases.
Retirement fund administrator Alexforbes reported over 33,000 savings pot withdrawal claims within days of the new tax year starting. Most withdrawals are being used to pay off debt or cover basic living expenses—signalling just how financially stretched many households are. Public sector workers in particular—police officers, teachers, and government employees—are under immense pressure, with some resigning from their jobs simply to access their pensions.
This is according to Sebastien Alexanderson, Head of National Debt Advisors who said this kind of financial distress among consumers is deeply worrying.
“These accounts of government employees are not isolated cases—they reflect a wider issue of over-indebtedness and lack of financial resilience. That’s why a mid-year money check-in isn’t just helpful—it’s urgent.”
Fuel Prices Fall, Inflation Softens
In a welcome development, South African motorists saw another 22 cents per litre drop in petrol prices this May, following a sizeable 72c cut in April. Global oil prices have dropped below $62 a barrel, and a strengthening rand (now at R18.21/USD) is further helping to bring costs down.
This has pushed inflation to a historic low of 2.7% year-on-year, giving consumers a little more room to breathe.
“While these short-term wins are encouraging, they’re not permanent,” Alexanderson warns. “Now is the time to cut back where you can, build an emergency fund, and prioritise reducing your debt.”
Interest Rate Cuts Likely, But Don’t Get Comfortable
Economists expect the South African Reserve Bank (SARB) to announce at least two more interest rate cuts in 2025, possibly as early as July and again in November. This would follow three 25bps cuts already made between September 2024 and January 2025.
While lower rates can bring monthly relief to borrowers, Alexanderson advises consumers to stay cautious.
“If your repayments drop, use the difference wisely—don’t spend more. Save it. Pay off more of your debt. Don’t fall into the trap of borrowing again just because interest is cheaper.”
Budgeting for Income Fluctuations and Financial Stress
Despite the economic reprieve, South Africa’s working class is under pressure—especially government employees. Union leaders say some employees are using up to 85% of their salary on debt repayments. Many are skipping meals, selling assets, or resigning to access retirement savings through the new two-pot system.
“These aren’t extreme examples. We see clients like this daily,” says Alexanderson. “The issue is systemic wages haven’t kept up with the cost of living, and debt becomes a survival mechanism. But it’s not sustainable.”
Alexanderson advises building a flexible budget that protects you from income shocks.
Key tips for staying afloat in 2025:
- Budget around your essentials, not your full income.
- Reduce high-interest debt like credit cards and store accounts.
- Avoid early pension withdrawals unless absolutely necessary.
- Use windfalls or rate savings to create a financial buffer.
He said the second half of 2025 offers a rare financial window: falling fuel costs, a stronger rand, potential interest rate cuts, and low inflation. But this won’t last forever.
“Use this time wisely,” Alexanderson concludes. “Reassess your goals, reset your budget, and reach out for help if you’re overwhelmed. A little action now can save you a world of stress later.”
