SA Consumers Resilient in Face of Tough Economy, but Many Cut Spending to Survive

South African consumers remain optimistic about their financial futures, despite inflation, a rising cost of living and high interest rates taking its toll on their pockets – and this optimism in the face of prevailing economic challenges suggests the potential for recovery and growth, says information and insights company TransUnion.

According to TransUnion’s Q3 2023 Consumer Pulse Study, seven in every 10 (70%) South African households expect an increase in their income over the next 12 months, and nearly the same number (66%) are optimistic about their household finances in the same period. More than one in three (36%) have seen an increase in their income in the past quarter, with one in five (23%) seeing their incomes drop.

However, debt management remains a major concern, with more than one in three South Africans (38%) unable to meet their current bills and loan obligations. Of those unable to pay their bills and loans, 39% plan to make partial payments, 36% will dip into their savings, 24% will borrow money from friends and family, and 11% plan to take out a personal loan. Another 10% said they don’t know how they’re going to pay.

Weihan Sun, Director of Research and Consulting at TransUnion Africa, said the survey revealed diverse income trends and an environment of varied financial stability across the population.

“Economic pressures remain top of mind for many South Africans, with concern about inflation and high interest rates affecting consumer behaviours. Consumers are worried about debt, and taking on additional credit, and as a result, there’s been a clear pullback in spending to help cope with these economic realities,” said Sun. “This will have a knock-on effect in sectors like retail and automotive, as ordinary South Africans postpone big purchases.”

Around 60% of survey respondents have reduced discretionary spending, with 26% going as far as to cancel subscriptions or memberships. Gen X (born between 1965-1980) and Baby Boomers (born between 1946-1964) have made the most significant cuts in discretionary spending, at 67% and 72% respectively. Looking ahead, Baby Boomers (30%) expect an increase in bills and loans, while younger Gen Z (born 1997-2010) consumers (30%) predict a rise in their retail expenditure.

Interestingly, both Gen Z and Millennials (born 1981-1996) intend to increase contributions to retirement funds and investments and curtail large purchases, which they predict will decline by 39% and 46%, respectively. These expectations reflect a generational pivot towards securing long-term financial stability in the face of the current economic climate, says Sun.

Access to credit

Nearly all respondents (90%) believe access to credit and lending products is crucial to achieving their financial goals, but only 36% of respondents believe they have sufficient access to credit. As a result, fewer than a third of consumers (31%) plan to apply for new or refinance existing credit in the coming year. Around half (49%) of the consumers who intended to apply for credit or refinance abandoned their plans, due largely to high costs of new credit (33%) and fear of rejection due to income or employment status (26%).

Consumer Empowerment

The overwhelming majority of consumers (92%) believe that keeping track of their credit reports is crucial to effective financial management. But while 30% of respondents check their credit reports monthly, one in five (21%) never do. Consumer perceptions also vary around the potential impact of non-standard data (such as rental payments, gym membership payments, or buy-now-pay-later services) on their credit scores: 48% believe their scores would improve, 25% expected no change and 10% feared a decrease.

Identity Protection

Digital fraud remains a pervasive issue for South African consumers, with 48% of respondents saying they have been the target of fraud schemes in the last quarter, and 10% falling victim to these scams. Worryingly, 42% of respondents were unaware of any fraud schemes targeted at them, which suggests they could unwittingly become victims without their knowledge.

The most prevalent type of fraud is phishing (trying to trick people into divulging personal information by email, 38%), money and gift card scams (34%), and smishing (trying trick people into divulging information by SMS, 33%).