The problem with economic data is that they tell us what we already know. When the data showed that South Africa was in a recession, most households could have told Stats SA that for free.
Interviews with 1 000 working households by Old Mutual Savings and Investment Monitor (SIM) in July 2016 had already reflected a deteriorating household position. The annual study of the attitude to finances of working South Africans living in major metropolitan areas found last year that the level of satisfaction with their overall financial situation had dropped to 5.7/10 – the lowest recorded since the survey started in November 2010. Two-thirds of households admitted to feeling high levels of stress about their finances, mostly due to debt.
So, perhaps we can look at the 2017 survey for some signs of where the economy is heading. The good news is that households appear to be in a better position than they were a year ago.
According to SIM, the satisfaction with the current financial situation has recovered back to 2015 levels, but, at an average of six out of 10, it remains a poor rating.
It is also important to note that, according to SIM, low-income households earning less than R6 000 per month are not feeling any better; in fact, they remain highly dissatisfied with their financial situation.
But for higher-income earners – those earning more than R6 000 per month – the survey found definite areas of improvement.
This is also supported by figures from the TransUnion Consumer Credit Index, which found that people are starting to pay off their debts and are reluctant to take on further credit. This despite the fact that household cash flow has not necessarily improved, suggesting that people are starting to change their consumption behaviour.
The Momentum Unisa Wealth Report released this week found that the real value of South African households’ net wealth increased slightly in the first quarter. While it remains lower than a year ago, and is at the same level as three years ago, the report found that the reason for the increase was that the take-up of credit not only slowed, but actually contracted in real terms. There was a strong pull back in the real value of outstanding unsecured, credit card and instalment sales debt, while real mortgages also shrank.
The SIM survey found, unsurprisingly, that debt levels and financial stress are closely linked, with 64% of those who describe their stress levels as “overwhelming” admitting to having too much debt and having
trouble managing it.
According to the 2017 SIM survey, although stress levels around money continue to be highest in low-income households, all income levels experienced an improvement in their stress levels, with fewer people feeling overwhelming stress and even some lower-income earners who claim to feel no stress. On average across all income groups, 9% still feel overwhelming stress and only 13% feel no stress at all.
Households still remain under severe financial pressure. When asked if there were times that their income did not quite cover their living costs, 52% of households found (at least once) that their income did not cover their living costs, down marginally from the 57% recorded in 2016. The survey points out that the “improvement” in these results is only really seen in households with income levels higher than R14 000. For households with an income of less than R6 000, nearly 80% found at least once in the last year they couldn’t make it from payday to payday.
Most people rely on family or friends to meet those shortfalls or draw from savings, but what was interesting is that the percentage of people who said that they would skip paying bills decreased.
This again suggests that households are prioritising paying off debt. Consumers are rather cutting back on day-to-day spending and trading down, shopping at a cheaper supermarket or buying a cheaper brand.
We do remain vulnerable when it comes to unforeseen expenses as, overall, our savings levels are greatly depleted. For example, half of the households earning between R6 000 to R13 999 could not cope with an emergency of R10 000, while 50% of households earning R20 000 to R39 999 could not manage with an unexpected expense of R50 000.
That suggests that most households do not even have one month’s salary put away for emergencies.
While households are certainly nowhere near back to the levels of financial health we experienced prior to 2009 and times remain tough, there are glimmers of hope that things are improving.
It may even just be that we are learning that debt is not the way out of a financial crisis. As more households focus on paying off debt, they will feel less financial pressure and have more disposable income available.
TALK TO US
SMS us at 35697 using the keyword STRESS and tell us if you feel that your stress levels around your money are improving or worsening. Please include your name and province. SMSes cost R1.50