SA’s consumer optimism wanes as Covid-caused financial hardship remains

Consumer optimism is on the decrease as South Africans battle financial hardship and household incomes remain under pressure due to the Covid-19 pandemic, with 50% of respondents in a survey saying their finances have still not recovered, while 61% said their household income was still impacted.

TransUnion conducted the online survey in partnership with third-party research provider, Qualtrics® Research-Services among 1,100 adults between 10 and 16 August, a month after the civil unrest and during the peak of the third wave of Covid-19 cases.

The survey showed that nearly two-thirds of South African consumers said their household income was currently decreased due to the pandemic. The number whose household income was still impacted, 61%, has remained steady during the year, with 62% in March and 61% in June.

ALSO READ: 82% of SA consumers in dire financial straits

Consumer optimism impacted by financial hardship

Other findings showed:

• Previous higher levels of optimism have also decreased, with the percentage of consumers who were upbeat about the future decreasing to 69%, from 75% in June and 76% in March
• Less than half (47%) said they were confident that their household finances will fully recover over the next 12 months compared to 52% in June
• Only 3% of surveyed households said their finances have fully recovered from the effects of the pandemic
• 50% said they have not recovered
• 79% of consumers said they are “very or extremely concerned” about the current inflation rate
• 83% were making changes to their purchasing behaviour as a result
• 87% of consumers whose household income decreased, remained concerned about their ability to pay their bills and loans
• 41% of all participants had been in arrears for a bill or loan in the past three months
• 33% reported missing one and two bills or loans
• 17% missed three bills or loan payments
• 47% said they cannot pay mashonisa loans
• 41% could not pay private student loans
• 38% could not pay personal loans
• 35% could not pay accounts with retail and clothing stores.

“The study highlights the fact that a substantial proportion of South Africans remain under financial pressure. It is concerning that there are signs of our country’s famous optimism waning. This could be a result of the unrest and spike in Covid-19 cases combined with the slow pace of economic recovery in the country,” Andries Zietsman, head of financial services at TransUnion South Africa, says.

ALSO READ: Financial pain of Covid-19 pandemic gradually receding

Reasons for financial hardship

The main reasons household incomes have decreased are as a result of job losses, reduced salaries and reduced working hours:

• 38% of participants said someone in their household lost their job in the past month
• 34% indicated someone in their household had their salary reduced
• 29% had work hours cut
• 42% of lower-income consumers from households earning less than R50,000 per year, indicated someone in their household lost their job in the past month.

ALSO READ: Consumer income drops while unsecured debt spikes – index

Credit growth and consumer optimism

Opportunities for credit growth are also not great although the study shows a clear consumer appetite for credit:

• 81% of households consider access to credit important
• only 33% believe they currently have sufficient access to credit
• 31% plan to apply for new credit or refinance existing credit within the next year
• 43% plan to apply for a new personal loan
• 35% plan to apply for a new credit card
• 43% considered applying for new credit or refinancing existing credit, but decided not to
• 35% felt that the cost of new credit or refinancing was too high
• 32% believed their application would be rejected due to low income or their employment status.

ALSO READ: Amid Covid-19 fallout, middle class continues to be SA’s golden goose

Fraud adds to financial hardship

Fraud also remains an issue, with 40% of participants reporting that they are personally aware of a digital fraud attempt targeted at them in the last three months, while 5% fell victim to it and 48% said the fraud attempt was from third-party seller scams on legitimate online retail websites and 32% 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.