South African Consumer Optimism Wanes in Face of Unrest and Ongoing Financial Hardship

Quarterly TransUnion Consumer Pulse study finds household incomes currently decreased due to the pandemic still well over 50%

Research conducted by TransUnion in mid-August, a month after the country was gripped by civil unrest and a peak in the third wave of COVID-19 cases, shows that nearly two-thirds of South African consumers (61%) said their household income was currently decreased due to the COVID-19 pandemic. This number has remained steady since the beginning of 2021 (62% in March and 61% in June).

However, previous higher levels of optimism have decreased, according to TransUnion’s ongoing Consumer Pulse study[1]. The proportion of consumers who were upbeat about the future decreased to 69%, from 75% in June and 76% in March, while less than half (47%) said they were confident that their household finances will fully recover in the next 12 months (52% in June). Only 3% of surveyed households said their finances have fully recovered from the effects of the pandemic, and exactly half (50%) said they have not recovered.

In addition, 79% of consumers said they are ‘very or extremely concerned’ about the current inflation rate, and 83% were making changes to their purchasing behaviour as a result.

Consumers who said their household income was currently decreased remained concerned about their ability to pay their bills and loans (87%). Four in 10 (41%) of all consumers surveyed reported that they had been in arrears for a bill or loan in the past three months. Of the consumers who have missed payments in the last three months, 33% reported missing one and two bills or loans, and 17% missed three bills or loans. Among those with these bills and loans, the top items consumers said they cannot pay are mashonisa loans (47%), private student loans (41%), personal loans (38%), and accounts with retail and clothing stores (35%).

“The study highlights the fact that a substantial proportion of South Africans remain under financial pressure. What’s concerning is that we’re seeing signs of our country’s famous optimism waning. This could be as a result of the unrest and spike in COVID-19 cases which took place in July, combined with the slow pace of economic recovery in the country,” said TransUnion South Africa’s Head of Financial Services, Andries Zietsman.

The main reasons household incomes have decreased are as a result of job loss, reduced salary and work hours. In particular, 38% of all surveyed consumers said someone in their household lost their job in the past month, while 34% indicated someone in their household had their salary reduced and 29% had work hours cut. Forty-two percent of lower-income consumers (households earning less than R50K pa) indicated someone in their household lost their job in the past month.

Opportunities for credit growth

The study shows a clear consumer appetite for credit. Eight in 10 (81%) of households consider access to credit important, but only 33% believe that they currently have sufficient access to credit. Almost a third (31%) plan to apply for new credit or refinance existing credit within the next year, with new personal loan (43%) and new credit card (35%) applications being on top of the list.

Forty-three percent of surveyed consumers considered applying for new credit or refinancing existing credit, but ultimately decided not to: 35% felt that the cost of new credit or refinancing was too high, and 32% believed their application would be rejected due to low income or their employment status.

Fraud remains an issue

Two in five consumers (40%) reported that they are personally aware of a digital fraud attempt targeted at them in the last three months, and 5% have fallen victim to it. Of consumers who were aware of a digital fraud attempt targeted at them, nearly half (48%) said the fraud attempt was from third-party seller scams on legitimate online retail websites, and almost a third (32%) was from phishing.

Zietsman says consumers should keep tabs on their credit reports, both to stay on top of their financial health and to guard against fraud. Consumers can get their free annual credit report here.

[1] This online survey of 1,100 adults in South Africa was conducted 10–16 Aug. 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 increase representativeness across South Africa resident demographics, the survey included quotas to balance responses to the census statistics on the dimensions of age, gender, household income, race and region.