SA consumers optimistic about their finances, worried about inflation – study

South African consumers are optimistic about their finances although they still have inflation-linked concerns. While economic conditions were uncertain, 72% of local consumers expect their income to increase in the next 12 months, just four percentage points down from the first quarter of 2024.

Information and insights company TransUnion published its Consumer Pulse Study for the second quarter of 2024 this week, showing that while there is an air of optimism carrying through from the first quarter, local consumers continue to navigate financial uncertainty.

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However, while there was optimism in the air, 77% of the participants said they regard inflation for everyday goods as their top financial concern. Despite a slowdown in inflation to 5.2% in April, it remains above the midpoint range of 4.5% of the South African Reserve Bank (Sarb). Many economists expect that it is set to remain high for the foreseeable future.

After inflation, participants were also concerned about interest rates (55%) and job security (52%), according to the study. “Consumers are cautiously optimistic about their future incomes, but the underlying economic volatility and the cost of living continue to pose significant challenges,” Edgar Tshabalala, senior manager: research and consulting for financial services at TransUnion South Africa, says.

Consumers are optimistic about finances

The study shows that South African households experienced varied income trends in the second quarter. While 39% of them reported increased incomes, two percentage points up from the first quarter, 40% saw no change, while 21% faced a decline.

In line with the expected and actual income increases, 71% of the participants were 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.

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However, 37% of the participants anticipate difficulties in servicing their current debt commitments, particularly among the Gen X (43–58 years old) and Millennials (27–42 years old) demographics.

But it is not all doom and gloom. 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.

The study also underscores why the economy is not growing. Financial strain is affecting discretionary spending, with 38% of respondents planning to allocate more funds to bills and loans over the next three months, while many intend to cut back on non-essential expenditure such as travel and dining out (net 22% planned to reduce spending), in-store or online shopping (net 5%) and large purchases like appliances or cars (net 7%).

Access to credit

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 respondents 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 addition, 49% of the respondents intended to apply for credit but did not follow through. The reasons varied, with the top being that the cost of financing credit is too high (29%), the consumer decided that new credit was not needed (26%), the consumer believed the application would be declined due to income and employment status (25%) and that the application would be rejected due to credit history (23%).

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Many consumers keeping an eye on their credit reports to spot scams

Another interesting fact from the study is that 93% of the respondents deemed 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%). Respondents also believe that incorporating alternative data, such as rental payments and buy now, pay later loans, into credit reports could improve their credit scores.

Fraudulent activities remain a significant concern for all respondents, with 49% of them targeted by schemes but not falling victim in the second quarter. One in 10 (10%) 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 (31%) and phishing (28%) 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 the first quarter. In addition, 89% of respondents 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,” Tshabalala says.