South African Consumers Stay Resilient in Face of Economic Headwinds

South African consumers shrugged off macroeconomic headwinds to remain optimistic about their financial prospects in the third quarter of 2022. According to research conducted by TransUnion at the end of August, three in four (74%) expect their incomes to increase in the next year, while two in three (64%) said they will be able to pay their current bills and loans in full.

In all, 37% of respondents in TransUnion’s quarterly Consumer Pulse study^[1] said their incomes had increased in the previous three months, a six percentage point increase from the prior quarter and 11 percentage points up from the beginning of this year. In all, 15% of consumers said they had started a new job and 20% had opened a new business, in the month leading up to the survey.

These positive signs came despite the annual inflation rate soaring to a 13-year high of 7.8% in July 2022, up from 7.4% in June and well above the upper limit of the South African Reserve Bank’s target range of 3%–6%. Annual core inflation, which excludes food prices, non-alcoholic beverages, fuel and energy, rose to 4.4% in July 2022 – the highest since October 2017.  Weihan Sun, Director of Research and Consulting at TransUnion Africa, cautioned that continued inflationary pressures may cause further cuts in consumer spending.

“We see the country’s shrinking unemployment rate (33.9% in Q2 2022, from 34.5% in Q1^[2]) being a key driver of improved household incomes, but despite improved household incomes and a greater ability to service debt, the rise in inflationary pressures is definitely going to see some consumers cutting back on discretionary spending. This sentiment is likely to continue in the coming months,” said Sun.

Among age groups, Gen Z (individuals born between 1995 and 2004) reported the largest increase (41%) in household income in the last three months, with 21% saying they started a new business. Twenty percent saw a salary increase and 17% started a new job in the month before the survey.

“These are encouraging signs, considering the South Africa youth unemployment rate of 61.4% in Q2 2022^[3],” said Sun.

South African consumers have a high awareness of the importance of credit and lending products, with more than nine in 10 (92%) saying they believe access to credit and lending products are important to achieve their financial goals. However, consumer appetites for new credit or refinancing of existing credit remain limited, with 36% saying that they would apply for new or refinance existing credit in the next year. More than four in 10 consumers (42%) said they have sufficient access to credit and lending products, up from one in three a year ago.

Managing financial choices

Seven in 10 (70%) said they conduct at least a quarter of their transactions online, a six-percentage point increase from the beginning of the year. As younger consumers come of age, the adoption of digital transactions may increase further.

Nearly all (96%) surveyed consumers believe monitoring credit is important, but only 60% check their credit at least monthly. More than half said their credit score would increase if businesses used information that is not included in a standard credit report, like rental and gym membership payments, short-term loans, or buy now, pay later (BNPL) agreements.

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

^[1] TransUnion’s Consumer Pulse survey of 1,047 adults was conducted 19–26 August 2022 by TransUnion in partnership with third-party research provider, Dynata. Adults 18 years of age and older residing in South Africa were surveyed using an online research panel method across a combination of desktop, mobile and tablet devices. Survey questions were administered in English. To increase representativeness across resident demographics, the survey included quotas to balance responses to the census statistics dimensions of age, gender, household income and region. Generations are defined as follows: Gen Z, born 1995–2004; Millennials, born 1980–1994; Gen X, born 1965–1979; and Baby Boomers, born 1944–1964. These research results are unweighted and statistically significant at a 95% confidence level within ±3.0 percentage points based on a calculated error margin.

^[2] Source: Trading Economic

^[3] Source: Trading Economic