Number of Job Losses Grows as South African Consumers Feel the Pinch of COVID-19

TransUnion’s latest research shows pandemic’s effect on consumer finances

The effect of the COVID-19 pandemic on household incomes of South African consumers has stayed broadly stable over recent weeks, but the number of consumers who have lost their jobs has increased sharply since the beginning of April, according to newly released research from TransUnion.

The ongoing research* by TransUnion to better understand the financial impact of COVID-19 on consumers showed that 82% of households reported their income was being negatively impacted by COVID-19 as of early May, only a small change compared to 79% as of early April. Almost one in six (14%) said they had lost their jobs since the pandemic started – up from one in ten (10%) reported in early April. In addition, nearly 4 out of 10 (37%) of those who had been negatively impacted said they have seen their work hours reduced because of the pandemic – up from 32% reported in the first week of April.

“The pandemic is creating major economic and financial distress for consumers, with many jobs in the South African economy already being impacted or at risk due to drastic demand shifts,” said Lee Naik, CEO of TransUnion Africa. “Our ongoing research aims to better understand consumers’ perceptions and expectations for how this rapidly evolving situation is affecting their financial situation and subsequent ability to pay their bills. The insights in this report aim to better inform consumer, business and government decisions at a time when information on consumer impact is still emerging.”

Mpumalanga remains the most impacted province when it comes to COVID-19 related unemployment, with job loss in the province increasing to 26% (up from 12% since the survey started in South Africa in early April). This is potentially driven by the effects of the lockdown on the agricultural and mining industry, which are the largest industries in the province.

TransUnion’s research found that of those who have been financially impacted, the amount that consumers expect to be short in making payment obligations in the near future has increased by R500 to R7,500 since the first week of April. Nearly two-thirds (64%) of these consumers reported that household budget changes during the pandemic involved cutting back on discretionary spending. Forty percent have canceled subscriptions or memberships, and just under one third (32%) have canceled or reduced digital services (like wireless, satellite services and internet) due to household budget constraints.

There has been a significant increase in consumers turning to payment holidays provided by loan providers as lender communication has intensified. Overall, 44% of all consumers who are concerned about paying their bills report that they will not be able to make their rent payment, 39% will not be able to pay their personal loan, 37% will not be able to pay their cell phone bill, and 32% will not be able to pay their credit card. All of these bill types were unchanged between the April and May surveys with the exception of personal loans, which increased from 33% to 39%.

“With the majority of households under considerable pressure, we can only reiterate the importance of lenders and consumers having constructive conversations around ways to deal with these extraordinary circumstances. We also encourage consumers looking to minimise potential negative impacts of the pandemic on their credit profile to visit TransUnion’s COVID-19 website,” said Naik.

TransUnion’s research and credit education tools are updated weekly on its COVID-19 website as the company continues to support consumers and businesses from around the globe.

* Research methodology – TransUnion works in partnership with third party research provider Qualtrics ® Research-Services. Adults 18 years of age and older residing in South Africa were surveyed using an online research panel method across a combination of computer, mobile, and tablet devices. The survey included quotas to balance responses to the census statistics on the dimensions of age, gender, household income, race, and region. Research in South Africa commenced the week of 6 April and the most recent research was conducted week of 4 May.