Financial wellness in South African households increased only marginally between 2016 and 2017, according to the Momentum/Unisa Financial Wellness Index 2017 report, which was released last week. However, the overall situation has slowly but steadily improved since 2011, the year the index was introduced.

The index measures households’ finances and assets on a number of factors (see below), with the overall score out of 100. This overall score increased from 64.1 in 2011 to 67.7 in 2017. It was 67.3 in 2016. 

The seventh round of the annual Momentum/Unisa financial wellness research was conducted early this year and involved a nationally representative study of 2 746 households.

It found that 26.5% of households fell into the “financially well” category, 41.3% were “financially exposed”, 30.5% were “financially unstable”, and 1.7% “financially distressed” (see “Categories of financial wellness”). The last two categories represent households that are battling or failing to cope with financial pressures, and these combined have declined since 2011, from over 40% of households, to 32.2%.

The report says the small overall improvement of 0.4 points between 2016 and 2017 “can be attributed to a mixed bag of factors at the national economic (macro), community (meso) and household and consumer (micro) levels”. These include:

  • Macro-level: “Low but improved economic growth rate compared with 2016, low employment growth, high unemployment, low consumer and business confidence, lower consumer price inflation, lower growth in gross income per worker, stagnating real GDP-per-capita growth and low private consumption growth.”
  • Meso-level: “Low growth in early-stage entrepreneurship, high levels of inequality within and between communities, high levels of poverty in many communities, and widely differing levels of service provision in communities.”
  • Micro-level: “Low levels of subjective well-being, low household balance sheet growth, low levels of financial literacy, strong growth in the number of secondary school finishers (although there are many concerns about the quality of school education) and high levels of financial vulnerability among the low- and lower-middle income groups.”

How households are measured

Households are measured on five forms of capital. Two of these (environmental and social) are “inputs”, determined by external factors, and three of them (physical, asset and human) are “outputs”, or how the household has fared in managing their finances and creating wealth. Each is measured out of 10.

1. Environmental capital: The quality of the environment as determined by the quality of the dwelling (2016: 6.6; 2017: 7.4).

2. Social capital: The household members’ personal empowerment as determined by factors affecting their control over their financial situation and trust in financial 

and other institutions (2016: 4.9; 2017: 5.1).

3. Physical capital: The household’s income and expenditure (2016: 5.6; 2017: 5.1).

4. Asset capital: The household’s assets, liabilities and net wealth (2016: 5.0: 2017: 4.7).

5. Human capital: The household’s education status as determined by their qualification and skill levels (2016: 6.4; 2017: 6.7).

Two of these, physical capital and asset capital, which record households’ finances in purely monetary terms, declined between 2016 and 2017. There are a number of reasons for these declines, the report says. “The FNB House Price Index suggests that house prices declined by 1.1% in real terms between 2016 and 2017 … Households invested in shares via, among others, their retirement funds reaped the fruits during the latter part of 2017, when share prices increased. However, these improvements, as well as a decline in the debt-to-disposable income ratio from 74.1% in 2016 to 72.0% in 2017, were not sufficient to prevent the net wealth to disposable income ratio declining to 372.7% in 2017 from 376% in 2016.”

Looking at these factors over the seven years of the index (see graph), some trends become apparent. 

The report says: “Human capital scores increased due to a growth in the pool of household members with completed secondary and tertiary qualifications, while environmental capital grew because of the improved housing conditions of people. While these two forms of capital generally saw positive growth over the period 2011 to 2017, the growth patterns in physical and asset capital were fickle due to volatility in the levels of real household income and net wealth growth. Social capital levels remained low due to feelings of disempowerment, low levels of subjective well-being, financial vulnerability and low consumer confidence in the economy.”

The writers of the report suggest that a “disconnect” between the human capital index and the physical capital index can largely be explained “by the low production elasticity of employment, which stems from a skills mismatch in the economy. The skills provided by the South African labour supply are to a large extent out of kilter with the skills demanded by current and prospective employers. 

“This phenomenon also explains a considerable part of the high levels of unemployment, poverty and income inequality – the so-called ‘triple challenge’ – found in South Africa.”


  1. Financially well (a score of 80 to 100). This household is financially well in the current political/economic/social climate. However, negative developments may cause the household to become financially exposed.
  2. Financially exposed (a score of 60 to 80). Although the financial situation is not unwell, negative/positive changes will cause household to become either financially unstable or financially well.
  3. Financially unstable (a score of 30 to 60). This household is financially unwell. Its financial situation is very unstable, and adverse events and wrong decisions can easily change its position to financially distressed. However, some opportunities are available to become financially exposed.
  4. Financially distressed (a score of below 30). This household is deeply rooted in a financially distressed position. Major outside assistance is required for improvement.


The Momentum/Unisa Financial Wellness Index 2017 report lists
the following ways in which
South Africans can improve their financial wellness:

1. The attainment of high-quality, market-related skills. There is a very strong correlation between education/skills level and income. 

2. Growth in personal (cognitive, communication and social) skills. These skills are also beneficial in the job market.

3. Personal empowerment, through self-confidence and the belief in your ability to solve problems. 

4. Increased financial literacy. The survey found there is a low level of financial literacy in South Africa.

5. Increased financial capability. Research has shown that financial management and planning tools can make a world of difference to consumers who want to plan and budget, the report says.

6. Full financial inclusion. Inclusion rates for savings and investments, insurance, medical schemes and secured debt products are still fairly low, the report says.

7. Financial planning. Use qualified financial advisers.

8. Assisted and informed portfolio composition, including financial coaching.

9. Long-term consumption smoothing (by living within your means and reducing and avoiding debt), increased savings and preparation for retirement.

10. Continual monitoring and evaluation of financial outcomes.

Graphics/graphs courtesy of Unisa/Momentum.

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