South Africans are running deep into debt to cover the cost of living

South Africans are running deep into debt to cover the cost of living

The number of South Africans who took out personal loans has doubled in the past year to 34% compared to 2020, and the reasons behind this are worrying.

Speaking at the 2023 launch of Old Mutual Savings & Investment Monitor (Omsim), Vuyokazi Mabude, Head of Knowledge and Insights at Old Mutual, expressed his deep concern that the main reason for the increase in personal loans was to cover the cost of living. One in three respondents reported struggling to make their home loan payments.

The report reflects the views of more than 1,500 South African workers, with personal monthly incomes ranging from R8,000 to R100,000, on their day-to-day financial challenges. The report also explores what consumers are doing to deal with mounting financial pressures.

Mabod said the report shows marginal improvements in a few key indicators. These include some recovery in post-Covid-19 income streams, and a slight improvement in financial satisfaction and financial stress. [However]Confidence in the South African economy is at the lowest level yet recorded in the OMSIM survey, down from 56% (2015) to 27% (2023). The depreciation of the rand and the energy crisis contributed to the erosion of consumer confidence in the economy. Aside from the perceived psychosocial impact, shedding loads has placed direct pressures on budgets as consumers reconcile priorities and, in some cases, borrow money to fund alternative energy solutions.

Some noteworthy findings from the survey include:

  • At least 70% of South Africans have not seen any improvement in their income since 2020, and 45% continue to experience significant financial stress.
  • Consumers struggle to build savings stores, with 30% claiming to have savings that will only last one month or less. Fifty-three percent said they do not have enough money to cope with unplanned circumstances.
  • Debt levels are increasing, and debt is much more expensive to service.

When it comes to saving, consumer appetite for foreign investments has grown from 24% (2022) to 27% (2023), reflecting declining confidence in the domestic economy. Overall use of Stokvel among working black South Africans fell from 53% in 2022 to 48% in 2023. However, there has been an increase in Stokvels this year, driven by higher earners.

Despite constant financial pressures, people save but struggle to manage short-term and long-term priorities. The three most important savings goals, Mabod said, are primarily retirement, building emergency savings buffers and paying down debt.

To increase family income, South Africans hold several jobs. Polyjobbers make up 50% of this market, with more young workers (18 to 29 years old) becoming part of this growing trend. The number of young people who are transgender has increased from 60% in 2022 to 70% in 2023, as many of them use social media to supplement their income.”

The “sandwich generation” (people who support not only children but also parents and other older dependents) rose from 39% in 2022 to 43% this year.

To keep the lights on and businesses running, invest approximately 20% in generators or solar panels. The average expenditure on alternative energy solutions is just over R11,000 and one in three respondents reported needing to replace appliances due to power surges. At least 61% of the respondents have purchased rechargeable lights while 11% have invested in solar water heating panels. DM


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