One in three South Africans cannot pay their bills – survey

One in three South Africans cannot pay their bills and debt, but in general they remain optimistic about their financial futures.

Inflation, a rising cost of living and high interest rates have taken a toll on many pockets, with households struggling to make ends meet.

But optimism in the face of these economic challenges suggests the potential for recovery and growth, says credit information and insights company TransUnion.

According to TransUnion’s Consumer Pulse Study for the third quarter, seven in every 10 (70%) households expect an increase in their income over the next 12 months and nearly the same number (66%) are optimistic about their household finances for the same period.

More than one in three (36%) had an increase in their income in the past quarter, with one in five (23%) experiencing a drop in their income. However, debt management remains a major concern, with more than one in three South Africans (38%) unable to meet their current bills and loan obligations.

Of those unable to pay their bills and loans, 39% plan to make partial payments, 36% will dip into their savings, 24% will borrow money from friends and family and 11% plan to take out a personal loan. Another 10% said they simply do not know what they will do to pay bills.

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Concern about high interest rates and inflation

“Economic pressures remain top of mind for many South Africans, with concern about inflation and high interest rates affecting consumer behaviour.

“Consumers are worried about debt and taking on additional credit. As a result, there has been a clear pullback in spending to cope with these economic realities.

“This will have a knock-on effect in sectors like retail and automotive, as ordinary South Africans postpone big purchases,” says Weihan Sun, director of research and consulting at TransUnion Africa.

About 60% of the survey respondents reduced discretionary spending, with 26% going as far as to cancel subscriptions or memberships.

Baby Boomers (born between 1946-1964) made the most significant cuts in discretionary spending at 72%, followed by Gen X (born between 1965-1980) at 67%.

Baby Boomers (30%) expect an increase in bills and loans, while younger Gen Z (born 1997-2010) consumers (30%) predict an increase in their retail expenditure.

“Interestingly, Millennials (born 1981-1996) intend to increase contributions to retirement funds and investments and curtail large purchases (46%), while Gen Z aims to do the same and also rein in spending on large purchases (39%). These expectations reflect a generational pivot towards securing long-term financial stability in the face of the current economic climate,” Sun says.

Access to credit

Nearly all respondents (90%) believe access to credit and lending products is crucial to achieve their financial goals, but only 36% believe they have sufficient access to credit. As a result, fewer than a third of consumers (31%) plan to apply for new or refinance existing credit in the coming year.

Around half (49%) of the consumers who intended to apply for credit or refinance abandoned their plans, due largely to the high cost of new credit (33%) and fear of rejection due to income or employment status (26%).

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The importance of credit reports

The overwhelming majority of respondents (92%) believe keeping track of their credit reports is crucial for effective financial management. However, while 30% of respondents check their credit reports monthly, one in five (21%) never do.

Consumer perceptions also vary around the potential impact of non-standard data, such as rental payments, gym membership payments, or buy-now-pay-later services, on their credit scores, with 48% believing their scores will improve, 25% expecting no change and 10% fearing a decrease.

Identity Protection

Digital fraud remains a pervasive issue, with 48% of respondents saying they were the target of fraudulent schemes in the last quarter and 10% falling victim to these scams. Sun said it is concerning that 42% of respondents were unaware of any fraudulent schemes targeted at them, which suggests they could unwittingly become victims without their knowledge.

The most prevalent type of fraud is phishing (trying to trick people into divulging personal information by email, 38%), money and gift card scams (34%) and smishing (trying trick people into divulging information by SMS, 33%).