South Africans increasingly worried about personal finances

South Africans are increasingly concerned about their personal finances and the direction of the economy, with their worries now eclipsing that of Covid.

The cost-of-living crisis, precarious employment situations and personal family matters are keeping local consumers up at night.

According to the Deloitte State of the South African Consumer, that forms part of the company’s Global State of the Consumer Tracker, a monthly survey of consumers in 24 countries that has been running since April 2020, 45% of local participants were more anxious than a week before, putting South Africa in the third place of the most anxious countries.

Only consumers in Brazil (53%) and Poland (48%) were more anxious, with financial stress remaining one of the top drivers of anxiety.

In the South African survey, four in 10 participants said they are anxious about their personal finances, while a third are anxious about the direction of the economy, with only 38% having money left over at the end of the month after expenses and 57% feeling that their financial situation stayed the same or worsened over the past year.

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Gap between income and cost of living widening

The survey also showed that the gap between incomes and the cost of living is widening. With inflation inching up to 7.6% in October, many consumers are using their savings or take on debt to finance their spending and maintain their living standards.

In addition, 69% are concerned about their level of savings and lack confidence in their capacity to absorb future financial shocks. This is no surprise as essentials, such as food and housing, take the bulk of their monthly wallets, putting the share of discretionary expenditure under pressure.

The survey also showed that lower and middle-income consumers tend to divert more of their income to food, housing and education, while the upper income groups show an intention to spend more on leisure and entertainment.

However, local consumers are doing something about their precarious situation by engaging in cost saving behaviour to mitigate pressure from rising prices. Therefore, grocery shoppers were most likely to choose meals based on most of the food they have at home (44%) and dedicate more time to planning their shopping (42%), while about a third switch to cheaper proteins and buy store brands.

ALSO READ: South Africans worry more about money than Covid-19 – survey

Persistent high inflation and personal finance

Another insight was that persistent inflation is taking a toll on consumer sentiment, with 57% feeling their financial situation stayed the same or worsened over the past year. They are also four times more concerned about their level of savings and twice as likely to delay large purchases, while 50% are more concerned about upcoming payments and only 38% has money left over at the end of the month.

They delay large purchases, because 40% are concerned about credit card debt, although 37% can still afford to spend on things that bring them joy, such as food and drink.

Most of them lack confidence in their capacity to absorb future financial shock, with 59% expecting their income to be same or higher next year, while 69% are concerned about their level of savings and 75% expect prices to continue to increase.

They are also not optimistic that things will change in the short or medium term, with only 21% expecting their financial situation to improve next year, while 30% believe they will have financial means to live their best life in five years and 42% feeling they are progressing toward their financial goals.

ALSO READ: Consumer confidence deteriorates dramatically as economic outlook sours

Rising everyday prices

South Africans are the most concerned of all the countries in the survey about rising prices for everyday purchases and this concern about rising prices accelerated from 86% in September 2021 to 88% in October 2022 due to recent interest rate hikes and stubbornly high inflation.

At 7.6%, inflation remains above the Reserve Bank’s target range. Between August and October 2022, consumers appear to have experienced significant inflation increases in the clothing and restaurant categories.

South Africa’s discretionary spending remains below the global average of 76/24 with 77% of their wallet taken up by essentials, such as housing, groceries, healthcare, transport, clothing, everyday household goods, saving and investing, internet and data, personal care and education.

Only 23% goes toward more discretionary spending, such as restaurants and takeout food, electronics and home furnishings. On social media 58% of purchase-related mentions spoke about the topic of pricing and pricing conversation shifted from affordability to special offers, while 30% of special offer mentions expressed a negative sentiment.