SA Consumers Show Financial Resilience as Economy Reopens, but Concerns Remain

The number of South African consumers who say they are in households whose income is currently negatively impacted by the COVID-19 pandemic has dropped 20 percentage points since the week of 30 Nov., 2020 according to newly released research by TransUnion. However that study found nearly nine out of 10 (87%) of these financially impacted consumers remain concerned about their ability to pay their bills and loans.

The ongoing Consumer Pulse (formerly Financial Hardship) study[1], which aims to better understand the financial impact of COVID-19 on consumers, showed that 62% of consumers reported in March 2021 that their household income is currently negatively impacted by the COVID-19 pandemic. That’s compared to 82% the week of 30 Nov., 2020. This was largely due to the South Africa economy showing signs of increased activity after emerging from the second COVID-19 wave in Feb., said TransUnion South Africa’s Head of Financial Services, Andries Zietsman.

Only 3% of surveyed households indicated that their finances have fully recovered from the negative impact of the pandemic, and just over half (51%) said they have not yet recovered. In spite of this, nearly eight out of 10 (76%) South Africans are optimistic about the future, with 54% feeling confident that their household finances will fully recover in the next 12 months.

“We’re now a year into this study, and what it’s telling us is that while we’re seeing signs of consumer resilience as part of a broader recovery, South Africa’s economy and consumers are still under severe financial pressure,” said Zietsman. “The biggest indicator of this is the fact that the majority of consumers are still struggling to pay their bills and loans on time, and credit providers are going to have to find innovative ways of managing this.”

How consumers are managing their budgets

The research shows consumers have been making changes to their household budgets since the beginning of the pandemic to better cope with decreases in their household income. Almost three in four negatively impacted consumers (74%) said they have cut back on discretionary spending; 42% have canceled subscriptions or memberships; and 38% have canceled or reduced digital services.

The biggest household spending changes that respondents said they will make over the next three months to manage expenses is decrease discretionary personal spend (61%) and decrease in-store and online retail shopping purchases like clothing, electronics and durable goods(46%).

However, the proportion of negatively impacted consumers concerned about their ability to pay their bills and loans increased from 84% the week of 30 Nov., 2020 to 87% in March 2021. More than one in three impacted consumers (37%, up by six percentage points from the week of 30 Nov., 2020) expect to not be able to pay their bills and loans within one month.

Among consumers whose household income is currently decreased and have these bills/loans, the top ones that they said they will not be able to pay are mashonisa (informal) loans (46%), followed by personal loans and private student loans (both at 44%) and retail/clothing store accounts (39%). Among all South African consumers, 39% said they are planning to pay partial amounts towards their bills or loans to remain current, while just under half of respondents (46%) report being past due on a bill or loan in the past three months.

Nearly all (99%) respondents think saving for unexpected events or financial setbacks is important, and 83% of households now view savings as more important since before the COVID-19 pandemic. However, they said standing in the way of achieving their financial goals is insufficient income (61%), high expenses (45%) and unexpected emergencies(39%).

Consumers plan for recovery

Consumers are adopting a range of strategies to deal with the financial impact of COVID-19. A third (33%) of negatively impacted consumers plan to pay their current bills and loans using savings. While nine in 10 (91%) of all South African consumers consider access to credit important, with 23% considering it extremely important, two-thirds (67%) of respondents have not considered applying for additional credit. The primary reasons for not applying were the cost of new credit was too high (26%); or they believed their application would be rejected due to their income (32%) or their credit history (25%).

Fraudsters stay active

In all, four in 10 (41%) consumers feel it is ‘extremely important’ to monitor their credit score – up by 20 percentage points since the week of 30 Nov., 2020. One of the main reasons that consumers check their credit reports is to protect against fraud (44%). Just over one in three (37%) of South African consumers said they are aware of a digital fraud attempt related to COVID-19 targeting them in the last three months, and 5% fell victim to the attempt. Among those targeted, unemployment related scams remain the most common scheme (29%), followed by phishing (28%) and third-party seller scams on legitimate online retail websites (24%).

Consumers can get their free annual credit report here.

[1] This online survey of 910 adults in South Africa was conducted 5-17 March 2021 by TransUnion 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. Survey questions were administered in English. To ensure

the general population sample representativeness across South African resident demographics, the survey

included quotas to balance responses to the population statistics on the dimensions of age, gender,

household income and region. These research results are unweighted and statistically significant at a 95%

confidence level within ±3.25% percentage points based on a calculated error margin.