Financial distress prevails among South African consumers

South African consumers continue to face very difficult financial times. These are the results of a survey conducted by infoQuest/TrendER, a leading South African online research company, where 500 South Africans were interviewed.

Financial satisfaction levels have dropped significantly over the past 3 months. In infoQuest’s April survey, 39% of active consumers rated their financial dissatisfaction 1 to 5 out of 10, while by July 2022 that number had risen significantly to 51%. Only 1 in 10 consumers rate their financial situation as very good/excellent.

“South Africans are going through a very difficult time. This sharp decline in just over three months is most likely a reaction to a combination of poor economic conditions (with a full recovery from Covid-19 not yet realized), rising gasoline prices and the effect of load shedding on households and businesses,” says Claire Heckrath, CEO of infoQuest.

One in two South Africans is worse off today than before Covid-19

One in two South Africans say their financial situation is worse now than before Covid-19, and this differs significantly across different age groups. Young consumers (those aged 18 to 34) were less affected. “It’s likely because these younger consumers may be able to go home to cut costs, as well as the fact that they may have fewer expenses and debts (such as schooling, etc.) than their counterparts. older,” says Heckrath.

infoQuest also compared its results to a global survey conducted by YouGov (an international market research and internet data analysis company), in 2021. interesting comparisons between different countries,” she says.

Current situation compared to pre-Covid-19 South Africa UK WE China India
Worse 50% 27% 25% 36% 53%
The same 24% 50% 45% 38% 30%
Better 26% 18% 22% 21% 14%
I do not know 5% 8% 4% 3%
The table above shows only a selection of the countries included in the YouGov survey

Household actions over the Covid-19 period

  • Active reduction of non-essential expenses

62% of South African consumers said they had reduced non-essential spending since the start of the Covid-19 pandemic. The higher the LSM level, the more consumers discounted. This makes sense, given that this segment, with higher incomes, potentially spends more on luxuries and non-essentials, and therefore has more to cut.

Compared to the 17 countries in the YouGov survey, South Africa has achieved the highest level of ‘reduction of non-essential items’.

  • Had to rely on their savings to get by

South Africa is in 4th place when it comes to having to rely on savings to meet its needs, behind Mexico, India and Singapore.

  • Have accumulated more debt during the pandemic

About one in four South Africans have racked up more debt during the pandemic. This is the highest level compared to other countries in the YouGov survey.

  • I was able to save more during the pandemic: “Pandemic Savers”

The UK enjoys the highest level of ‘pandemic savers’ of the countries surveyed, with one in three Britons able to save more. In South Africa, this figure was 19%, mainly due to the younger age segment, who may have fewer financial obligations and may be more likely to return home with their parents or move in with other children. others to save money.

Data sources for the 4 charts above: South Africa data: InfoQuest (July survey); Other countries: YouGov.

What will we do with the savings made during Covid-19?

Just over half of South African consumers who managed to save during COVID-19 say they will store/save everything, in order to have a reserve of savings in the future. Only a small percentage (4%) would spend it all, and the rest (41%) say they will save some and spend some.

In terms of expenses, everyday items (e.g. groceries, gas) and school fees were the top categories of planned expenses, indicating that savings would primarily be spent on “essential” items rather than luxury items. Two out of five consumers would use part of their savings to pay off their debts, while 35% would spend it on vacation.

How the debt will be repaid

Those who said they had accumulated debt during the pandemic were asked how they intended to repay that debt.

Mainly, by decreasing other expenses, consumers planned to use the savings to pay down their debt. Heckrath says that “a rather disturbing finding is that about one in four consumers intend to gamble with the aim of using the winnings to pay off their debt.” Unfortunately, this can go the wrong way, with players potentially losing more and going into more debt. Borrowing from family and friends is also not a solution because it becomes a debt cycle with “borrowing from Peter to pay Paul”.

Gas/Freight Charge Effect

63% of consumers said rising gas prices had an extreme impact on their lives. Those in the younger age categories and those in the lower LSM categories were more likely to be extremely affected by gasoline costs. This is understandable given that the share of revenue spent on transportation costs is likely to be higher in these segments.

How Consumers Earn Money to Go Further

Sticking to a monthly budget is the primary method by which consumers make their money work. “What is encouraging is that 62% of young adults (18-34) say they do. It’s important for young adults to learn how to set a budget and stick to it,” says Andrea Kraushaar, Director of Research and Insight at Youth Dynamix.

General entertainment (going out/dining out and socializing) is also a main category that has been reduced in order to grow the money.

Rather buying online than going to the store is mentioned by one in five consumers, while 9% say they carpool to save on gas costs.

make money go further

Stick to a monthly budget 56%

Spend less on going out / eating out / socializing 46%

Buy items online rather than going to stores 19%

Reduce sports/recreation 12%

Suspension of studies/studies 11%

Carpool and spend less on gas 9%

Choose to rent/share accommodation seven%

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Sarah J. Greer