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Pandemic raised our financial resilience, survey shows

Published Aug 1, 2022

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South Africans are recovering from the financial damage caused by the Covid-19 pandemic, showing higher income levels and financial satisfaction, lower stress levels, a more optimistic outlook and marginally lower reliance on personal loans.

This is according to the 2022 Old Mutual Savings and Investment Monitor survey, which was published last week.

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The findings appear to contradict those of three recent credit industry surveys covered in Personal Finance. In the article “South Africans battling to save in current adverse conditions”, one of the surveys, by debt counselling firm DebtBusters, showed that consumers, especially younger people and women, were showing higher levels of financial stress, and that many people were using an unhealthily large portion of their income to service debt.

The contradictory findings may be because the survey samples represented slightly different population groups, but it may simply be a matter of timing: DebtBusters conducted its Money Stress Tracker from mid-June to July 1, whereas the Old Mutual survey was conducted from April 24 to May 13. Since the middle of May the economic situation for consumers has deteriorated, with inflation rising above 7%, the rand weakening against the US dollar, the commodity boom reversing, interest rates rising, and record load-shedding taking its toll.

The main Old Mutual sample for 2022 comprised 1 505 online interviews of working people earning more than R8 000 a month. Another sample, of 401 people earning between R1 000 and R7 999 a month including social grant earners, was covered separately. All data was reweighted according to the Unisa Bureau of Market Research’s income and demographic profiles of working South Africans aged 18 to 65 years.

Putting the pandemic behind us

What the Old Mutual survey does show clearly is that, despite current economic woes, South Africans are better off than in the first year of the pandemic, when the effects of the state-imposed lockdowns were so harshly felt.

And while last week’s article reported that people couldn’t afford to save in the current climate, the survey picked up that the pandemic had heightened people’s awareness of the need to better manage their finances and to save for emergencies.

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Close to one in nine respondents (86%) agreed with the statement “Covid-19 has made me change the way I think about and manage my finances”. The report says there is “evidence of consumers having converted this heightened awareness into concrete action, with the proportion of consumers who have a savings buffer of three months or more increasing from 27% in 2020 to 39% in 2022. Savings rates remain low, however, and for many their overall position remains precarious.”

The Old Mutual survey also found that there was an increased appetite for riskier investments – equity-based investments, offshore investments and cryptocurrencies – as people sought higher returns. A majority of respondents (60%) said they were extremely or somewhat likely to invest in cryptocurrencies in the next year, while 51% indicated they were extremely or somewhat likely to invest offshore.

Although there were no previous figures to compare them with, 44% of respondents said they gambled online, with 9% of those saying they gambled every day and 33% saying they gambled two or three times a week. “The propensity to at least try online gambling is much stronger among younger consumers: 76% of 18-29 year-olds have gambled online at some point, compared with only 33% of those aged 50 years or older,” the report says. A disturbing 37% of those who gambled online said they did it “to make ends meet and try to survive financially”.

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Low income group

The survey of people earning below R8 000 a month showed that this group has been the hardest hit regarding the impact of the pandemic on earnings, with 57% earning less than before the outbreak of Covid-19.

Concerns around income and job security were paramount: 74% said they constantly worried about losing their job.

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This group had the highest incidence of having left a job in the past two years (29%) and were the most likely to have left for reasons beyond their control, such as retrenchment, a temporary job coming to a close, or an employer closing down. Furthermore, on regaining employment 52% found themselves earning less than before.

“This market is the most likely to go out to work rather than work fully or partially from home. As such they will be hardest hit by the recent transport/fuel price hikes, with more pain to come,” the report says.

Borrowing from friends and family as a coping mechanism is very high (62% have done so in the last year), and because retirement savings are low or non-existent, this group is at risk of being trapped in a cycle of dependency: 48% said they hoped their children would look after them when they are old, while 38% said the government would look after them.

Lessons learned

“Overall, the 2022 Savings and Investment Monitor research has shown that South Africans have learned from some of the harsh lessons of the Covid-19 period,” says Vuyokazi Mabude, head of knowledge and insights at Old Mutual. “The shock of losing or facing reduced income caused many to relook and re-evaluate their finances. Positive changes were made and have impacted the attitudes towards savings – something that will stand people in good stead while they face the new challenges presented by 2022.”

PERSONAL FINANCE

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