Data from fintech group Altron has shown that the overall ability of South African households to take on and service debt improved a little in the third quarter of 2023, lifted by a few major indicators, including pay of public servants. But there are signs the index is "in a trough" given in a weak economy and higher interest rates, Altron said, having been supported recently by South Africa's improved employment picture.

The Altron Fintech Household Financial Resilience Index (Afhri), compiled by economist Roelof Botha, picked up 0.8 points on a quarterly basis to 109.9 in the three months to end-September, also helped by both increased public and private sector employment, higher annuities, as well as a higher value for unit trust assets.

The index figure means that SA's household finances are almost 10% more healthy than the first quarter of 2014, which is used as a benchmark, and it was little changed on a year-on-year basis.

The Afhri, developed by Altron Fintech, uses 20 indicators, all of which are directly or indirectly related to sources of income or asset values. The almost 60-year-old group provides the technology platform used by micro-lenders and is looking to provide its clients with additional insight into market dynamics.

Botha told News24 while the index remains propped up by some indicators, of more concern is rising household debt levels, as well as the continued decline of private sector pay in real terms.

Salaries are most heavily weighted in the index, given their importance to most households, and private sector salaries had fallen 0.7% year on year during the quarter. They are 6.8% down in real terms from the same quarter in 2019 - or pre-pandemic.

Data from automated clearing house BankservAfrica has shown this trend has got even worse recently, with salary increases slowing to 1.8% year on year in October, the first month of the fourth quarter, from 4.1% in September.

This means there was a 3.4% drop in real take-home pay in the month, with Investec chief economist Annabel Bishop saying in a note on Wednesday that higher operating costs, such as counteracting loadshedding, were weighing on businesses. While consumer inflation is slowing, it has been uneven in its descent, said Bishop, with SA only likely to see an interest rate cut in the second half of 2024, with only a small possibility of a second-quarter cut.

Botha said high interest rates were undoubtedly the "thorn in the flesh" of SA's economy, with data also showing a rise in civil defaults and credit impairments. The "trigger needed" for SA's economy to take off was lower rates, he said, which were particularly weighing on lower-income households.

"It's not a question of whether they are too high, they are way too high, as far as I'm concerned," he said, adding, "The total value of household credit out there is less than it was 10 years ago. This is unbelievable. Our economy has never been able to grow at sustained real rates, high rates unless household credit is growing."

Household income to debt costs was the worst performing measure, meanwhile, worsening 1.1% on a quarterly basis and almost 17% year on year, with Botha saying many with mortgages were struggling. Industry data also shows that the average deposit required for a bond for first-time home buyers has shot up from 8.2% in 2019 to 14.7%.

Increased spending on infrastructure, and a drive for renewable energy was supporting employment, he said, but interest rates are, therefore, weighing heavily on the labor-intensive residential construction market.

But there are some reasons for optimism, and falling real-term pay is at odds with the improvement in SA employment. Botha said real pay should eventually start picking up again. "People are prepared for lower real salaries, and employers realise that," he said.

Public sector pay, meanwhile, picked up 4.2% in real terms year on year, with Botha saying this is actually also disturbing, given it was extremely unlikely productivity picked up at the same rate. He added, "And I'm an optimist, as you know."

The MD of Altron FinTech, Johan Gellatly, added in a statement on Thursday that the index not bode well for household consumption spending during the first quarter of 2024, especially after the December holiday period, when personal credit facilities are often stretched to their limits.

"While it is too early now to determine how consumers were impacted over December, we are of the view that the start of the year may be tough for retailers across the board, with households clearly under strain, especially those in the lower-income brackets," he said.