South African Consumers Optimistic About Personal Finances Even as Inflation-Linked Concerns Prevail

• Quarterly TransUnion Consumer Pulse Study shows 72% of South African consumers expect their incomes to rise in the next year
• Consumers committed to paying down debt faster (30%), saved more in an emergency fund or stokvel (26%) in response to financial uncertainty
• Most consumers (91%) see access to credit and lending products as important to achieve financial goals

Information and insights company TransUnion, has published its Consumer Pulse Study for Q2 2024 showing that while there is an air of optimism carrying through from Q1 2024, South African consumers continue to navigate financial uncertainty.

While economic conditions were uncertain, 72% of South African consumers expect their incomes to rise in the next 12 months, just four percentage points down from Q1 2024. However, 77% of consumers see inflation for everyday goods as their top financial concern. Despite a slowdown in inflation, to 5.2% in April 2024, the rate remains above the South African Reserve Bank’s midpoint range of 4.5% and the expectation amongst many economists is that it is set to remain high for the foreseeable future. Interest rates (55%) and job security (52%) are consumers’ second and third top financial concerns, according to the study.

Edgar Tshabalala, Senior Manager: Research and Consulting, Financial Services at TransUnion South Africa, says: “Consumers are cautiously optimistic about their future incomes, but the underlying economic volatility, and the cost of living, continue to pose significant challenges.”

Income trends and consumer optimism

South African households experienced varied income trends in Q2 2024. While 39% reported increased incomes – two percentage points up from Q1, 40% of consumers saw no change, while 21% faced a decline in income.

In line with the expected and actual income increases, 71% of consumers are optimistic about their household finances over the next 12 months and 63%, predominantly Baby Boomers (age 59 and above) and Gen Z (18–26 years old), are confident about their ability to meet their debt obligations. However, 37% anticipate difficulties in servicing their current debt commitments, particularly among the Gen X (43–58 years old) and Millennials (27–42 years old) demographics. In a show of financial prudence, 30% of respondents opted to pay down their debt faster in the last three months. At the same time, 26% opted to save more in an emergency fund or stokvel, and 20% saved more for their retirement.

Financial strain is impacting discretionary spending, with 38% planning to allocate more funds to bills and loans over the next three months, and many intending to cut back on non-essential expenditure such as travel, dining out, etc. (net 22% planned to reduce spending), in-store or online shopping (net 5%), and large purchases like appliances or cars (net 7%).

Credit and financial inclusion

Access to credit is accepted as being crucial for financial inclusion and economic participation, with 91% of consumers acknowledging its importance. However, only 38% feel that they have sufficient access to credit, led by Millennials at 47%.

While 41% of Gen Z said they plan to apply for new credit or refinance existing credit in the next year, only 32% of this cohort believe they have sufficient access to credit. Among them, 35% are looking at personal loans, 26% at credit cards, and 25% at student loans. “All of these are considered entry-level credit products, and suggest low credit product penetration in this entry-level population in the credit market,” says Tshabalala.

In the quarter, 49% of consumers intended to apply for credit but did not follow through. The reasons varied, with the top reasons being: the cost of financing credit is too high (29%); decided didn’t need new credit (26%); believed application would be declined due to income and employment status (25%) and believed application would be rejected due to credit history (23%). The consumers who believe the cost of financing is too high is largely driven by Baby Boomers (45%), Millennials (32%), and Gen X (30%).

Monitoring credit reports

The study shows that 93% of consumers deem it essential to monitor their credit reports, with more than half (56%) accessing their reports monthly. This practice is prevalent among Gen Z (66%) and Millennials (65%). Consumers believe that incorporating alternative data, such as rental payments and buy now, pay later loans, into credit reports could improve their credit scores.

Fraud and consumer education

Fraudulent activities remain a significant concern, with 49% of consumers targeted by schemes but did not fall victim in Q2 2024. One in 10 (10%) consumers were targeted and fell victim to fraudulent schemes, and another 41% were not aware of fraudulent schemes targeted at them. The primary fraud methods include money/gift card scams (37%), smishing and phishing (31% and 28% respectively), and third-party seller scams on legitimate online retail websites (26%).

Identity theft saw a notable increase during the quarter, affecting 16% of respondents – an increase of seven percentage points from Q1 2024. With this, 89% of consumers reported a concern about the security and privacy of sharing their personal data, overwhelmingly driven by fear of identity theft (75%) and personal invasion of privacy (70%).

“These numbers show how important it is for consumers to monitor their credit records regularly. Early detection of fraudulent activities that affect their credit scores enables consumers to take timely corrective action,” says Tshabalala.

Consumers can get their free annual credit report from TransUnion here.

Note to editors:

Net descriptor indicates percentage of consumers who reported plans to decrease spending from those who reported plans to increase spending.