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South African consumers are entering 2025 with very little hope, drowning in debt and without any savings.
This is according to a new survey that shows that 64% of the respondents bring no savings with them into the new year to fall back on.
The latest Debt Rescue survey paints a bleak picture of a nation in deep financial trouble and drowning in debt with no safety net, despite 38% of households prioritising saving money every month at the top of their list of New Year’s resolutions.
Neil Roets, CEO of Debt Rescue, says the results of the post-festive season survey are deeply concerning and indicate that South Africans are turning to credit to make ends meet in January. What’s worse is they have no real way of settling their debt over the upcoming months either.
“It is a matter of plugging the holes and hoping for the best, for most citizens. While festive season spending does play a role, it is important to note that this time over 53% of South Africans took great care not to overspend during the festive period, while another 29% stretched their budget by a minimal amount.
“This shows a shift to heightened financial caution and reflects the broader economic challenges citizens face.”
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Inflation had a major effect on festive season spending according to the survey results, with 51% of people polled citing adjusting for inflation as a primary driver behind their spending behaviour.
A disturbing survey insight is that people are planning to cut back on necessities this year to reduce costs, with 60% of respondents saying they will cut their clothing budget, while 38% say they will buy less food.
Earlier this week, Mervyn Abrahams, coordinator of the Pietermaritzburg Economic Justice and Dignity Group, which compiles the monthly household food basket, sounded the alarm as South Africans face a daunting increase in food prices at the beginning of January.
He warns that there is every indication that households are battling to feed their families owing to wage increases that are not on par with inflation and other competing costs, especially with the opening of schools and municipality bills.
“Cutting back on food is not a workable solution for households, especially considering the red flag raised by Abrahams regarding malnutrition and in particular child stunting. As he points out, this urgently needs to be prioritised as an economic, health and human dignity emergency,” Roets says.
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Health minister Dr Aaron Motsoaledi also revealed recently that more than 1 000 children had died of severe acute malnutrition in the past two years in South Africa.
Commenting on South African spending patterns in 2024, Standard Bank’s solution owner of Digital Money Manager, Shené Mothilal, noted a key trend in the data tracking of the spending patterns of the bank’s retail customers, with an increasing share of spending going towards interest payments.
Roets says since the country’s prime interest rate has been increasing since late 2021, remaining high until the first 25 basis point cut in September last year, with another reduction in November, this is not a surprise.
“Sadly, there is no relief in sight yet, according to the latest projections in the market, with experts predicting either a 25 basis points cut or no change at all in the repo rate when Reserve Bank governor Lesetja Kganyago announces the decision on 30 January.
“The governor has repeatedly said that the Monetary Policy Committee (MPC) would proceed with caution on rates while the outlook remains uncertain, even as its modelling signals further cuts on the horizon,” Roets says.
ALSO READ: SA economy in 2024: bad news for rand, GDP and unemployment
Since the MPC’s last meeting on 21 November, the rand has weakened by 4.5% against the dollar, responding to concerns that the Federal Reserve would make fewer rate cuts than expected due to the strong US economy and president-elect Donald Trump’s tariff threats.
Add to this another steep petrol price hike on the cards for February according to the latest projections by the Central Energy Fund and the looming electricity tariff hike set to kick in in April this year and you can see the tough year South Africans face, he says.
“While households will try to cut back on costs wherever possible to manage the post-festive season financial minefield that is an inevitable part of Januworry, the harsh reality is that most people will turn to their credit and store cards to make it through the month.
“This will simply perpetuate the habit of leaning more heavily on debt to make it through each month thereafter. Unfortunately, for many people this is the only option they have to cope with the rising cost of living and income that is simply not keeping up.”
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