How side hustles can help combat rising debt and unemployment

As consumers continue to battle with making ends meet, income is being eroded by inflation, and jobs are being lost, one solution is to start a side gig.

Research indicates that between 14% and 16% of middle-income households earn additional income from one or more side hustles, according to loan provider DirectAxis. 

This comes as debt is increasing, with DebtBusters stating that, as of the first quarter of this year, 91% of consumers who applied for debt counselling had a personal loan – a record since it started compiling its regular Debt Index.

“Personal loans, especially one-month loans, remain a lifeline for many, because income has not kept pace with rising expenses,” says Benay Sager, executive head of DebtBusters. 

Inflation has had a serious compounding effect on people’s ability to make ends meet and has been eroding their take-home pay. DebtBusters’ data shows that the compound effect of inflation means that consumers have 53% less purchasing power now than in 2016.

Its figures indicate that, of those who have applied through it for debt counselling, an average of more than two-thirds of their net income goes into paying down debt – the highest percentage since 2017. 

Compared to 2016:

• Consumers in most salary bands spend 25% of their disposable income, after debt repayments, on water, electricity, rates, and transport. Food inflation has led to sacrificing insurance and assurance cover. 
• For people taking home R35,000 or more, unsecured debt levels have increased by 90% - the highest ever. 

This situation is heightened by the fact that thousands more people lost jobs in the first quarter of the year, with the unemployment rate going from 31.9% in the three months to December 2024 to 32.9% as of the quarter to March.

When including discouraged job seekers, which is a truer measure of the job situation, the rate went from 41.9% to 43.1% over the same quarter-on-quarter analysis. This comes as another 130,000 South Africans entered what Statistics South Africa calls the “working age population” – those who are now legally old enough to work.

Statistics South Africa specifically noted when it released this information earlier this week that youth between 15 and 34 years are the most vulnerable, with the unemployment rate for that age bracket up to 46.1% from 44.6% quarter-on-quarter.

Hayley Parry, money coach and facilitator at 1Life's financial education unit, Truth About Money, said, “I think there are a few headwinds that make this a scary time in terms of job security. We've got trade wars happening globally, a lot of uncertainty around that, and then we've got local budget uncertainty happening as well as very low growth.”

Anchor Capital economist Casey Sprake said that South Africa needs an economic growth rate of 3% a year to have “material job creation”. Last year, the economy grew at 0.6%, and Moody’s most recent forecast is 1.5% for this year – a 0.2 percentage point decrease from its previous prediction.

Parry said that when jobs are being shed, a proactive approach is to get into a side hustle that could potentially boost income. “Perhaps you're feeling a bit of a cash crunch, or you need to work extra hours to fill up those emergency fund coffers, or you've just been retrenched,” she said.

The idea is taking things that you're good at, like baking or entertaining, graphic design, helping people organise parties, or looking after kids, and turning them into cash, said Parry. “These are all options for you to generate additional income.”

DirectAxis’ Gavyn Letley said starting a successful side hustle requires some thought and planning. 

“Side hustles are more successful when they align with your interests, expertise, and the need for a product or service. Basic market research is never wasted. This should determine the need for the business or the problem it will solve and the competitive environment,” said Letley.

Letley added that it’s important to understand initial costs, which could include:

• Startup costs such as buying equipment, software, or setting up a website; operational expenses such as internet and phone costs, transport, rental, insurance, and buying inventory.
• Legal and compliance fees for registering the business, obtaining permits, and setting up an accounting function or tax structure, and professional fees for external consultants.
• Branding and marketing costs for social media advertising, search engine optimisation, website hosting, logo design, and promotional material. 

In addition, before jumping in, it’s important to prepare a business plan, he said. “Summarise the nature of the business. Then define the target audience and the best marketing tools to reach them effectively. Use the cost breakdown to determine a pricing strategy and budget,” said Letley.

There may be times when finance is needed, as most people starting a side hustle to make ends meet don’t have sufficient disposable income to fund the business, Letley added.

Letley also advocates starting small and not investing too much upfront, rather testing the concept before scaling up.

Other points Letley raises are to make use of free resources such as courses and social media platforms to build knowledge, better understand the market, and how to run a successful business and grow the brand. It’s also vital to keep careful track of expenses, pricing, and profits to maintain cash flow, he said.

“Stay committed: success takes time, so persevere and adapt to challenges,” Letley added.

PERSONAL FINANCE