Several surveys released recently by organisations in the credit industry reveal that South African consumers are highly stressed financially and that Savings Month messages are largely being unheeded because people can’t keep up with their day-to-day expenses, let alone being able to save.
The DebtBusters Money-stress Tracker survey of 14 000 visitors to its website (not undergoing debt counselling) showed that younger people and women were showing higher levels of financial stress, and that many people are using an unhealthily large portion of their income to service debt.
Seventy percent of respondents said they were experiencing financial stress. Of these 94% felt this was impacting their home life and 77% their work life. Three-quarters of them (76%) believed it was affecting their health.
Generally, women were more stressed about their finances, home and work life and health than men. In particular, women were 30% more likely than men to be stressed about their health as a result of financial stress, and 20% more worried about paying their debt each month, compared to men.
Perhaps unsurprisingly, financial stress was most acute among the younger respondents and those with less income.
Concerningly, 72% of respondents said they were spending 30% or more of their take-home income to service debt, with 39% spending over half their income to do so. Benay Sager, chief executive of DebtBusters, says: “We normally advise consumers to not spend more than 30% of their take-home pay on debt repayments; at most this should be 40%.”
The 35-44 year age group was under the most severe debt repayment pressure, with 44% of these respondents using more than half their income to service debt.
Another survey, by debt counselling firm DebtSafe, highlighted how people are finding it difficult to save in the current economic environment. Four fifths (80%) of 1 447 respondents in DebtSafe’s “South African Consumers’ Financial Reality” June 2022 survey said they struggled to save, with 27% saying they were not able to save anything.
The main reasons given were:
- Not having money left after paying for their living costs and deductions;
- Having too many financial responsibilities; and
- Having too much debt.
“Consumers are experiencing dire financial times, and thus, #SavingsMonth is no celebration this year. With the escalating living costs and bills upon bills, one can understand why saving does not take priority when South Africans are fighting to survive. The biggest financial concern consumers currently have is that they cannot save for anything and the main reason is the high cost of living,” says Carla Oberholzer, spokesperson and debt adviser at DebtSafe.
Meanwhile, the Experian South Africa’s Consumer Default Index (CDI) for the first quarter showed that more first-time credit consumers were defaulting on their debt repayments, although year-on-year there had been an improvement.
The CDI increased quarter-on-quarter, moving from 3.49 in the last quarter of 2021 to 3.68 in the first quarter of 2022. Year-on-year, however, the index went from 4.39 down to 3.68. Outstanding debt remains at R1.97 trillion, while first-time defaults in the first quarter were on debts totalling R18.11 billion.
Jaco van Jaarsveldt, head of commercial strategy and innovation at Experian Africa, says the deterioration in the first quarter reflected the worsening economic conditions and one shouldn’t read too much into the year-on-year improvement.
“The year-on-year improvement was observed across all products, with the most significant improvement for unsecured credit products. Relatively speaking, the improvements observed for credit cards and personal loans were the most significant, with both of these products showing a relative improvement of almost 23%. However, consumers are cautioned against reading too much into the year-on-year improvements, which can be attributed to the tail end of reduced credit lending by credit providers and spending by consumers due to the impact of Covid lockdowns experienced in 2021.
“What is of concern is the quarter-on-quarter increase observed across all products, predominantly caused by the turmoil in Ukraine. The impact of the rapidly rising fuel, gas and grain costs, which are significant contributors to the global rise in inflation, is starting to have a direct impact on consumers across all products,” Van Jaarsveldt says.
PERSONAL FINANCE