Unemployment levels remain major barrier to financial freedom – study

Unemployment levels remain a major barrier to financial freedom. This comes after many South Africans are still struggling with more than half of their household income reduced due to the pandemic.

According to the Quarterly TransUnion Consumer Pulse study conducted in November, 55% of South African consumers said the Covid-19 pandemic is still affecting their household income in a negative way. Although this number was the lowest in the year, down from 61% in August and 62% in March, unemployment still affects their financial freedom.

Job losses, reduced salaries and working hours were the main reasons household incomes decreased, with 34% of participants saying someone in their household lost their job, while 32% said someone in their household had their salary reduced and 28% had their work hours cut in the previous month.

With the country recording its highest unemployment rate of 34.9% in 2021, lower-income consumers in households earning less than R50,000 per year were hit the hardest and 38% indicated that someone in their household lost their job in October 2021.

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Inability to pay debts due to unemployment

The study showed that 85% of consumers who said their household income is currently affected remain ‘highly concerned’ about their ability to pay their bills and loans. Unsecured debt was their greatest worry, with 29% unable to pay personal loans, 28% unable to pay mashonisa (informal and/or unregistered credit providers) loans, 24% unable to pay private student loans and 21% unable to pay retail and clothing store accounts.

“While we are seeing a slight improvement in the number of people who found the pandemic negatively affected their finances, the study highlights that many South Africans remain under pressure.

“November brought with it changed circumstances following months of lockdown, including municipal elections, increased freedom of movement and increased load shedding. For many consumers, the economic recovery is slow and arduous and will undoubtedly have many more bumps along the way,” says Weihan Sun, director of financial services research and consulting at TransUnion Africa.

Only 5% of respondents indicated that their household income fully recovered after the pandemic affected it, while 58% of respondents were hopeful that their household income would recover and 42% were less optimistic.

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Consumers now wary of credit and digital fraud

The study also showed that the respondents have a lingering wariness of credit, with 79% of households considering access to credit ‘important or moderately important’. However, only 34% believed they currently had sufficient access to credit.

The financial struggles during the pandemic also had a clear impact, with 47% of respondents whose household income was impacted during the pandemic saying they considered applying for credit, but ultimately decided against it for fear of being declined due to the current status of their income/employment (35%) and the high cost of new credit (34%).

Unfortunately, the survey also showed that financially affected respondents are becoming targets for digital fraud, with 40% saying they came from third-party seller scams on legitimate online retail websites and one 26% saying they were targeted through an unemployment scam.

Sun says it is critical for consumers to keep tabs on their credit reports to stay on top of their financial health and guard against fraud.