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Under pressure: SA consumer finances deteriorate in quarter as cost of living rises

The report offers tips for financial wellness, such as preparing a grocery shopping list beforehand and sticking to it. Photo: AP

The report offers tips for financial wellness, such as preparing a grocery shopping list beforehand and sticking to it. Photo: AP

Published Aug 4, 2022

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THE state of consumer finances in South Africa deteriorated in the second quarter of this year (Q2 2022), according to the latest Momentum-Unisa Consumer Financial Vulnerability Index (CFVI), which indicates that consumer finances dipped back into a very exposed state.

Johan van Tonder, an economist for financial wellness at Momentum, said this prominent decline could be attributed to steep rises in the prices of fuel and food products, load shedding, increasing interest rates and low economic growth.

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All these rising costs were then coupled with a limited access to tangible resources that consumers could otherwise have used to overcome their financial challenges.

“Every subcomponent of this quarter’s index has deteriorated including income, expenditure, savings, and debt servicing,” Van Tonder said.

The Q2 2022 index indicated the country’s debt servicing capabilities remained the greatest constraint on consumers.

“In fact, it was found that the ability for consumers to service debt worsened to the extent that they had to seek outside assistance to cope with their debt burdens,” he added.

The research also identified the side effects of a more financially vulnerable society, which included great strain put on relationships with family, friends and co-workers. This was compounded by the fact that this financial vulnerability would consume the thoughts of consumers and thus negatively affected their productivity in the workplace.

However, financial vulnerability experienced in this quarter saw an overall positive impact on consumer financial behaviour.

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“It changed mostly for the better in reaction to the higher financial vulnerability experienced in Q2. It makes sense as increased pressure tends to make consumers more cautious and behave with more prudence when it comes to their money,” Van Tonder said.

Several risk factors to consumer finances were identified in the report. Steep increases in municipal tariffs would pose a further risk to consumer finances in the third quarter of this year in addition to current risks such as higher interest rates, fuel and food prices and load shedding.

“We have seen record high fuel and food price increases,” said Van Tonder. “Add to this a sudden rise in interest rates and it is no surprise that our consumer finances will remain vulnerable going into the third quarter of the year.”

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The latest CFVI indicated that high levels of consumer financial vulnerability in the short- to medium-term would likely persist, given an increasing number of structural imbalances, downside risks, political and social instabilities, increasing poverty and inequality, as well as governance and government administration deficiencies.

“The future of our economy is not a positive one, and neither is employment or household income. This is going to cascade down in an all-encompassing way when it comes to consumer finances.” .

Although the outlook was more negative this quarter, Van Tonder said there were ways in which consumers could respond positively to this situation.

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With the unexpected changes in food costs, it could be difficult to prepare healthy meals without going over the budget. The report provides a few tips on shopping smarter giving the increase in food prices. These include preparing a grocery shopping list beforehand and sticking to it, limiting one’s time in a store and only purchasing the necessities.

Consumers also need to shop around for the best prices on items, consult the weekly store leaflets and newspaper adverts and visit store websites or applications. This would help them figure out which stores had the best prices and if they were getting a good deal on sale items.

“Always check the ‘use by dates’ on the food items to reduce early spoilage and wasted money and use a basket instead of a cart as you will have less space and it will force you to limit your purchases to necessities,“ it advised.

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