SA consumers cutting electricity and food to survive cost-of-living crisis

Consumers in South Africa are cutting back on electricity and food to make ends meet according to the latest Debt Rescue survey findings.

The survey reveals how 46% of consumers go without basic necessities each month when the money runs out, while the household debt-to-income ratio is projected to hover around an astounding 65% in 2024 in the current cost-of-living crisis.

The latest Debt Rescue survey, conducted to better understand the socioeconomic challenges facing consumers paints a grim picture of millions of citizens living hand to mouth, unable to afford enough food or electricity to sustain themselves, while battling to feed and clothe their children under severely constrained financial conditions.

General living expenses

A disturbing 31% of people polled said they had to cut down their general living expenses significantly, specifically in categories such as electricity (23%) and food (23%), while 25% switched to more affordable medical aid options and a significant 56% were unable to afford medical aid at all.

Neil Roets, CEO of Debt Rescue, says it is unconscionable that national energy regulator, Nersa can decide to make sweeping structural changes to electricity tariff structures that will place this basic utility out of reach of millions of people nationwide, especially against the backdrop of creeping poverty and distress.

“While the country pauses to celebrate South Africa’s new Government of National Unity (GNU), the lives of millions of South Africans remain a day-to-day struggle to put enough food on the table and keep their families warm while in the grip of the cold winter months.”

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Switching to gas and solar

A substantial 34% of the respondents switched to gas stoves and 10% installed solar geysers to manage costs. “While survey results show that people made significant lifestyle changes to adapt to their sub-economic living conditions, a whopping 46% simply go without each month when the money runs out. This is simply not a sustainable situation and should evoke deep concern among our leaders,” Roets says.

One of the Nersa changes is the implementation of a R230 service and capacity charge that will be levied on “normal” (non-indigent) prepaid electricity users, which means prepaid customers, known to be among poorer users, will pay a surcharge on their bills regardless of how much electricity they actually use in a month.

In addition, Nersa is moving to align prepaid tariffs with conventional tariffs and plans to increase these further in the coming years.

Unemployment and side hustles

While the Debt Rescue survey results for people between the ages of 25 and 65 show a 27% unemployment rate, the latest Statistics SA figures are far more frightening, with data for the first quarter of 2024 showing that the number of unemployed South Africans surged by 330 000 to a record 8.2 million, bringing the unemployment rate up to 32.9%, the highest in decades. 

However, it seems that South African consumers, with their can-do attitude, still try to make ends meet, with 40% of the respondents revealing that they initiated side hustles to supplement their income, indicating a proactive approach to managing their financial stress.

ALSO READ: Debt index shows consumers are battling with debt and stagnant incomes

Household debt-to-income ratio now at 65% in cost-of-living crisis

Unfortunately, Roets says, the flip side of the coin is that the household debt-to-income ratio is projected to hover around an astounding 65% in 2024. “Primarily due to the rapid sustained increase in interest rates, South Africans are now spending more of their income on debt-servicing costs than at any time in the last five years.

According to the Quarterly Bulletin of the South African Reserve Bank (Sarb) for the first quarter of 2024, South Africa’s middle class is under severe strain due to high interest rates, as defaults on home loans increased significantly over the past 18 months.

According to Experian Africa’s head of commercial strategy, Jaco van Jaarsveldt, Experian’s Consumer Default Index has deteriorated significantly over the past 18 months and can be seen as an accurate measure of consumer distress.

Roets says this is in line with what Debt Rescue sees regarding the number of people applying for debt counselling. “There has been a sharp rise in recent months and with the latest cost-of-living increases placing an even heavier burden on consumers, there is no light at the end of this tunnel.”