Small Signs of Recovery, but SA Consumers Still Feeling the Financial Strain
Newly released research by TransUnion shows that despite the easing of lockdown levels nationwide, nearly eight out of 10 (78%) South African consumers are still being financially affected by the COVID-19 crisis.
The latest results (week of 24 August) were relatively unchanged from the previous survey (77%) in July (week of 27 July), but still considerably lower than the highest level (84%) experienced at the end of May (week of 25 May). Some 40% of those impacted said they were working reduced hours, as businesses struggled to recover from the effects of previous lockdown restrictions. The number of financially impacted people reporting they had lost their job as a result of the pandemic shows slight improvement, but remained high (17%).
The ongoing research*, which aims to better understand the financial impact of COVID-19 on consumers, showed that almost nine out of 10 (89%) respondents remained concerned about their ability to pay bills and loans, which is unchanged from the previous survey. In all, one in three (33%) consumers expect to run into a financial shortfall within a month.
The proportion of impacted consumers who report having lost their jobs because of the pandemic, although still high, has dropped by four percentage points from 21% in the previous survey at the end of July, to 17% in the latest study. Although an improvement, this is still substantially higher than the first month the research was conducted (week of 6 April), at 10%. At the same time, in the latest survey just over one in six consumers (18%) reported having started a new job or developed new revenue-generating activity, up by 14 percentage points from 4% in May.
“We’re now into the sixth month of this study, and what it’s telling us is that while the financial impact of the pandemic is down from its peak and we’re seeing some small signs of recovery, South Africa’s economy and consumers are still under severe pressure,” said Lee Naik, chief executive officer of TransUnion Africa. “What this means for credit providers is that they’re going to have to continue to engage with consumers and be as flexible as possible as they navigate their way out of this crisis.”
More consumers plan to maintain bill payments
Consumers continued to make changes in their household budgets to better cope with the negative household income shock. In all, 59% of impacted consumers have cut back on discretionary spending, while 41% have canceled subscriptions or memberships.
Concern over future payment abilities is easing, with 25% of impacted consumers indicating they expect to be able to pay their obligations for longer than three months, up from 10% in April. The average monthly payment amount that respondents expect to be short when paying bills and loans is also decreasing, down 13% from R7,543 in June to R6,538 in the latest survey.
The bills that remain most at risk of non-payment are retail/clothing accounts and personal loans, which are most often indicated by consumers as obligations they are concerned about paying (39% and 37% respectively). Rent and utilities ranked next, with 32% of impacted consumers concerned about their ability to pay these bills.
Consumers plan for recovery
Consumers are changing behaviors to deal with the financial impact of the pandemic. The proportion of consumers delaying holiday plans increased by seven percentage points between the July and August surveys, up to 51%, despite the easing of local travel restrictions and the opening up of the hospitality industry.
More consumers indicated they are withdrawing or borrowing to increase cash flow. Over 40% of affected consumers said they are using money from their savings to help pay bills, up 11 percentage points from April. Additionally, 31% of respondents reported borrowing money from friends or family (up 10 percentage points from May).
Where possible, consumers are actively paying down balances, with 37% indicating they intended to pay at least a partial amount of their bills. At the same time, they are also looking to reduce debt and save with 15% indicating they are paying down debt faster and 13% reporting they saved more in their emergency fund or stokvel.
“Importantly, our latest research shows that among consumers who spoke to lenders and received accommodations during the crisis, more and more are getting back to making full payments. People are looking to actively manage their financial commitments and its important lenders support them in doing this with constructive dialogue and well-timed advice,” said Naik
The TransUnion survey showed that more than half (54%) of consumers that received an accommodation said they are making full payments on their car loans – up 14 percentage points from 40% from last month, and more than double July’s 25%. Similarly, 38% said they are making normal monthly payments on their home loan, more than double last month (18%).
Fraudsters stay active
Digital fraud schemes continued to increase, with 44% of consumers reporting they have been a target of digital fraud related to COVID-19 (up five percentage points from the previous survey and 19 percentage points from April). The leading scams are related to unemployment (32%) and third-party seller scams on legitimate online retail websites (31%). Fake insurance (28%) has replaced charity or fundraising scams (24%) as the third most prominent digital fraud scheme, up seven percentage points from the previous survey.
Consumers looking to minimise potential negative impacts of the pandemic on their credit profile can visit TransUnion’s COVID-19 website, or get their free annual credit report.
* 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.