Johannesburg – South African households saw welcome—though still modest—relief in Q3 2025, according to the latest Altron FinTech Household Resilience Index (AFHRI). The index improved 2.1% year-on-year, broadly matching GDP growth, but long-term gains in household resilience remain weak, averaging under 1% annually since the rate-hike cycle began.
Despite this, the slight drop in the prime lending rate helped support a gradual AFHRI recovery. The results again highlight concerns around the sharp rise in prime—from 7% in late 2021 to 11.75% in 2023—despite no evidence of demand-driven inflation.
Long-term trend: slow, uneven progress
Since the pre-pandemic period (Q3 2019), household resilience has grown just 0.6% per year, tracking real GDP growth. Since the AFHRI launched in 2014, resilience has averaged 1.2% annual growth, but households have lagged the broader economy since interest rate hikes began in 2021. The return to rate cuts continues to show a positive impact on both the AFHRI and GDP.
Pension withdrawals shake up key indicators
The new two-pot retirement system, introduced in September 2024, triggered sharp movements in annuity income and insurance policy surrenders.
Annuities jumped 9.3% year-on-year in Q3 2025.
Long-term policy surrenders surged 22.5% quarter-on-quarter.
Between July and September, surrender values hit R95.3 billion, far above historical norms.
While the system offers households liquidity, withdrawals are taxed at marginal rates—well above initial revenue forecasts.
Lower rates help households regain ground
Interest-rate declines continue to correlate strongly with household resilience. The Q3 AFHRI four-quarter average climbed to 114.3, up 0.5% quarter-on-quarter and 2.5% year-on-year, with 14 of 20 indicators improving annually.
Key movements include:
- Strong gains in unit trust assets, boosted by a record-high JSE.
- An improved income-to-debt servicing ratio following the prime rate cut to 10.5%.
- A modest rise in private-sector employment, though real salaries dipped.
Labour market remains a drag
South Africa’s job market is still tight: formal employment now mirrors unemployment at roughly 11.6 million people. Rising joblessness in 2023–2024—driven by higher rates and sub-1% GDP growth—continues to weigh on household resilience. With forecasts showing sub-2% GDP growth for 2026, more meaningful rate cuts may be needed to support employment and growth.
Outlook for Q4 2025
Festive-season spending, year-end bonuses, and November’s rate cut should support further AFHRI gains in Q4. Sustained improvement, however, depends primarily on job creation.
Comment from Altron FinTech
Johan Gellatly, Managing Director at Altron FinTech, said: “While financial pressures remain, the gradual uplift in the AFHRI is a positive sign that relief is taking hold. Lower interest rates are beginning to create room for recovery. At Altron FinTech, we continue to empower institutions with insights and technology to navigate shifting consumer behaviour, manage risk and take informed decisions.”
About the AFHRI
Developed with economist Dr Roelof Botha, the AFHRI tracks 20 indicators tied to household income and asset values. The index is updated quarterly and benchmarked to Q1 2014 (index value = 100), with all values expressed in real terms.
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Author: Bronwyn Nielsen from The Nielsen Network on behalf of Altron Fintech.
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