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South African consumers uncertain over their finances

By Edward West Time of article published Jun 18, 2020

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CAPE TOWN -  South African consumers are more uncertain about the future of their finances through the Covid-19 crisis than they were at the beginning of April, when the national lockdown started and the number of people who have lost jobs has continued to increase.

This was according to the latest research by consumer credit reporting agency TransUnion, released yesterday (wednesday), which showed that 16 percent of respondents to a June survey, who were financially impacted by Covid-19, had lost their jobs.

This was well up from 10 percent in the first week of April, when the first survey was done in South Africa.

“Although the lockdown restrictions are starting to ease, the pandemic continues to create major economic and financial distress for the economy and consumers alike,”  TransUnion Africa chief executive Lee Naik said in a statement.

The research showed also that more than eight out of 10 (83 percent) of consumers had been negatively impacted financially, and nine out of 10 (91 percent) of these were concerned about their ability to pay their bills and loans.

Consumers in the most vulnerable sectors of the economy had been the hardest hit.

The lockdown restrictions since March 2 had negatively affected the incomes of 89 percent of consumers employed in the construction and restaurant or food services industries, and 88 percent in the retail industry.

The proportion of consumers who were concerned about their ability to pay their current bills and loans had been steadily increasing, reaching 91 percent in week four, up just over three percentage points from week two in June,

As a result, 35 percent of impacted consumers were paying only a partial amount of their bills and loans, which likely reflected their desire to preserve cash flow.

Rent and utility payments remained the two bills of most concern, with 41 percent of consumers concerned about their ability to pay their rent and 40 percent, utilities.

The amount that consumers expect to be short in paying bills in the near future decreased by 6 percent, from R7 542.90 in week three in June to R7 098.40.

To close this gap, many (38 percent) were borrowing heavily against savings – up significantly, by eight percentage points. They were also continuing to tighten their purse strings, with only 17 percent of households saying they had not adjusted their budgets.

Apart from spending less on both entertainment and eating out, 24 percent had cut back on retirement savings.

Major purchases were also being delayed, with the top three items deferred being vacations and holidays (42 percent), home improvements (39 percent) and spending on education, which increased significantly by seven percentage points to 28 percent over a week.

One in five (20 percent) reported they had payment holiday arrangements with their lenders and service providers, with car loans, personal loans and credit cards being the top three products.

One in four (39 percent) consumers reported they have been a target of digital fraud related to Covid-19, up significantly from 25 percent.

The top three scams are unemployment scams (34 percent), charity or fundraising scams (25 percent) and third-party seller scams on legitimate online retail websites.

BUSINESS REPORT

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