Young South Africans are facing a financial crisis which could negatively impact the country’s economic future.

This is according to consumer analytics company Eighty20, which noted young people aged 18 to 24 are being squeezed by high unemployment, rising debt, and limited access to the formal financial system.

This age group makes up nearly half the population, with close to 30 million South Africans under the age of 24. However, the reality is bleak for the 6.7 million in the 18 to 24 bracket.

Only about one million of them are credit-active, and of those, nearly half have already defaulted on their loans. Their average monthly income is just R3,400, less than half the national average of R7,000.

According to Stats SA, youth unemployment is 62.4%, locking millions out of the economy and any chance of upward financial mobility.

Eighty20’s National Segmentation data showed clear signs of the significant pressure young South Africans are under.

The data showed that Most young credit users rely on retail credit, with 85% holding store accounts. A smaller share (17%) have personal loans, and just 9% hold credit cards.

Youth account for around 4% of the country’s total outstanding debt, which amounts to R10 billion.

However, their repayment performance lags behind that of the rest of the population, with R1.1 billion (around 11%) of that debt currently overdue.

“This elevated delinquency rate signals particular financial stress within this age segment,” said Andrew Fulton, Director at Eighty20.

A further insight from the MRF’s Marketing All Product Survey (MAPS), which surveyed 20,000 South Africans, revealed that young people are especially private about their debt.

They strongly prefer borrowing from formal institutions rather than friends or family, and they are highly concerned about others knowing when they take out a personal loan.

However, the most troubling insight is that most young South Africans don’t even make it into the formal credit system at all.

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Despite those under 24 accounting for roughly 20% of new credit entrants in recent months, hundreds of thousands remain excluded.

These so-called “thin file” clients have little or no credit history, locking them out of a wide range of opportunities.

“A credit score serves as the gateway not only to lending products and favourable terms, but also to essential services across multiple sectors,” Fulton explained.

“A healthy credit profile enables access to cell phone contracts, rental agreements, and can even influence employment opportunities.”

Even among those who can access credit, performance is often poor. Around half of young borrowers default early, and many never recover a healthy credit rating.

Eighty20 noted that this limits their future borrowing capacity and ability to participate in key aspects of adult life.

Fulton emphasised the need for better financial education and earlier intervention. “Those in distress need to get into debt counselling early. Education is critical if we want to stop this cycle.”

The root of the problem is South Africa’s youth employment crisis. According to Harambee’s Breaking Barriers report, around one million young people enter the labour market annually, but only 40% find work within a reasonable timeframe.

Another 30% cycle in and out of informal or precarious employment. 20% want to work but never find opportunities. And the final 10% stop looking altogether.

For those lucky enough to have jobs, one source of relief has been a side hustle.

According to BrandMapp, which surveys South African households earning over R10,000 per month, the proportion of people with no side income has dropped from 55% in 2021 to 49% today.

The side hustle economy has exploded into areas such as freelancing (graphic design, writing, web development), e-commerce, drop shipping, delivery and ride-share services, online tutoring, and content creation.

These ventures have become critical for young South Africans struggling to stay afloat. International trends reflect a similar shift, with about 50% of millennials and 46% of Gen Z globally now reporting having side hustles. (BUSINESSTECH)