Surprisingly 72% of SA consumers optimistic about their finances

Surprisingly 72% of South African consumers are optimistic about their finances over the next 12 months, the highest percentage ever measured since 2020. More than three quarters (76%) who participated in a study are also expecting a salary increase during 2024.

According to information and insights company TransUnion’s Consumer Pulse Study for the first quarter of 2024, almost two thirds (65%) of the households that participated in the survey are confident that they will be able to meet their current bills and loan obligations in the coming three months.

The percentage of households that expect to struggle to pay their bills and loans (35%) is seven percentage points lower than in the fourth quarter of 2023, when it was 42% and of these 34% plan to pay a partial amount that they can afford, while 33% plan to take on partial or gig work and 30% plan to use money from savings to help meet their financial responsibilities.

Lenders can also expect requests from 12% of this group of borrowers to refinance or renegotiate their current debt payment periods and/or interest rates.

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Households taking proactive long-term approach to finances

Lee Naik, CEO of TransUnion Africa, says the households surveyed for the study are taking a proactive long-term approach to their financial health.

“In addition to a feeling of overall buoyancy, the results show that consumers are responding responsibly to the prevailing macroeconomic factors by prioritising the repayment of existing debt and saving more for the short and long-term.”

Also, 37% of the respondents who said that the South African economy is in a recession are committed to paying down their debt faster, compared to 29% in the fourth quarter, while 51% (up from 47% in Q4) are cutting back on discretionary spending to be able to do so.

When it comes to savings, 19% of respondents put more into their retirement funding in the past three months, while 28% saved more in an emergency fund or stokvel. These numbers are also higher than in the fourth quarter, when 18% boosted their retirement funds and 25% put money into savings and stokvels.

It also seems that consumers are ready for more credit. Naik says that consumers’ appetite for new credit facilities is the highest ever since the fourth quarter of 2020, with 38% of respondents planning to apply for new credit or refinance existing credit such as property and car finance, credit cards and personal and student loans within the next year.

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Shift from current environment to long-term

There is a shift towards looking past the current environment to the long-term, which will be welcomed by the residential property sector, with 21% of respondents planning to apply for a new bond facility.

While 56% of South Africans say that they think access to credit and lending products is a ‘very’ or ‘extremely’ important enabler for achieving financial goals, the findings show numerous perceived barriers to access.

Of the respondents who considered applying for new credit or refinancing existing credit during the quarter but then decided not to (51%), more than a third (35%) said that the cost of this credit is too high.

Other respondents (15%) were put off by the ‘work’ it would take to answer the underwriting questions and 10% said they could not verify their personal information. Another 27% believed that their application would be rejected due to their income or employment status, while 23% felt that their credit history would count against them.

When they were asked whether they believed their credit scores would change if businesses were to leverage information that is not on a standard credit report, such as rental payments for accommodation, gym memberships and ‘buy now pay later’ transactions, 49% agreed.

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Digital fraud on the rise as more consumers move to digital

Naik notes that with 20% of households having added to their home-based digital services over the preceding quarter, transacting digitally is becoming even more commonplace.

“However, an alarming number (60%) of South Africans were targeted by an online, email, phone call or text messaging fraud scheme, with 9% falling victim over the same period.”

Findings show that 34% of consumers were exposed to a money or gift card scam and 33% reporting phishing, 31% smishing and 27% vishing scams [fraudulent emails, websites, social posts, and QR codes; text messages; and phone calls] aimed at tricking them into revealing their personal data.

One in 10 (10%) reported being targeted by identity theft scams for their personal information and more than a quarter (27%) encountered third-party seller scams on legitimate online retail websites.

Naik says 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. The overwhelming majority of surveyed households (93%) realise the importance of checking their credit records regularly and by far the biggest portion (52%) do so at least monthly.”