SA Consumers Battle to Pay Bills as Job Losses Climb

Newly released research by TransUnion (NYSE: TRU) shows South African consumers are now more uncertain about the future of their finances through the COVID-19 crisis than they were at the beginning of April, with the number of consumers who have lost their jobs as a result of the pandemic continuing to increase.

The ongoing research* by the information and insights company to better understand the financial impact of COVID-19 on consumers showed that 16% of respondents financially impacted by COVID-19 have lost their jobs, up from 10% in the first week of April when the first survey was conducted in South Africa. It showed that more than eight out of 10 (83%) of consumers have been negatively impacted financially, and nine of out 10 (91%) of these are concerned about their ability to pay their bills and loans.

Consumers in the most vulnerable sectors of the economy have been the hardest hit. The lockdown restrictions imposed in South Africa since 26 March have negatively affected the incomes of 89% of consumers employed in the construction and restaurant or food services industries, and 88% in the retail industry.

“Although the lockdown restrictions are starting to ease, the pandemic continues to create major economic and financial distress for South African economy and consumers alike,” said Lee Naik, chief executive officer of TransUnion Africa. “By understanding consumers’ perceptions of how this crisis is affecting household finances, we aim to better inform consumer, business and government decisions at a time when information on the wider impact of the pandemic is still emerging.”

TransUnion’s research shows the proportion of consumers who are concerned about their ability to pay their current bills and loans has been steadily increasing, reaching 91% in week four, up just over three percentage points from week two. As a result, 35% of impacted consumers are paying only a partial amount of their bills and loans, which likely reflects their desire to preserve cash flow. Rent and utility payments remain the two bills of most concern, with 41% of consumers concerned about their ability to pay their rent and 40% utilities.

The amount that consumers expect to be short in paying bills in the near future has decreased by 6%, from R7,542.90 in week three to R7,098.40. To close this gap, many (38%) are borrowing heavily against their savings – up significantly, by eight percentage points, compared to the previous survey period. They are also continuing to tighten their purse strings, with only 17% of households saying they haven’t adjusted their budgets.

Apart from spending less on both entertainment and eating out, 24% have cut back on retirement savings, up three percentage points compared to the prior week. They are also delaying major purchases, with the top three items deferred being vacations and holidays (42%), home improvements (39%) and spending on education, which increased significantly by seven percentage points to 28% from last week. One in five (20%) reported that they had payment holiday arrangements with their lenders and service providers, with car loans, personal loans and credit cards being the top three products.

Worryingly, digital fraud schemes continue to increase, with one in four (39%) consumers reporting they have been a target of digital fraud related to COVID-19, up significantly from 25% in week one. The top three scams are unemployment scams (34%), charity or fundraising scams (25%) and third-party seller scams on legitimate online retail websites. Consumers are monitoring their credit score more frequently when compared with last week – 38% check their score monthly or more frequently, up 5 percentage points.

“Consumers looking to minimise potential negative impacts of the pandemic on their credit profile can visit TransUnion’s COVID-19 website,” said Naik. “Until the end of July, TransUnion is offering you free Credit Score, Report and Profile Alerts to help you make the right financial decisions and to protect your credit health. Our research and credit education tools will be updated weekly as we continue 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.