Another thing for consumers to worry about in South Africa
The overall state of South African consumer finances improved slightly in the third quarter of 2022 according to the latest Momentum-Unisa Consumer Financial Vulnerability Index (CFVI).
However, despite improvements, consumers’ finances remain under pressure.
Momentum Metropolitan economist, Johann van Tonder, said that increasing food prices, load shedding, high fuel prices and political instability and corruption posed the highest risk to consumer finances in Q3 2022.
“In fact, the fastest climbing risk factor, though, is seen to be politicians not focusing on consumer needs. All of this was coupled with limits to resources consumers could access or use to deal with their financial challenges.”
The index indicated that income and expenditure indices increased, saving and debt servicing indices implied consumers are very exposed while debt servicing remained an ‘Achilles heel’ for consumers.
“Rising consumer price inflation and interest rates considerably reduced consumers’ ability to repay debt and save,” said Van Tonder.
The economist said that financial vulnerability continued to negatively impact consumers’ behaviour, particularly on two fronts. The report indicated a further increase in the already high number of consumers whose dire financial situations are affecting relationships with family, friends, and colleagues.
“More consumers are focusing so much on their financial problems, which causes them to neglect other important issues,” he said.
According to Momentum, risk factors are expected to continue in Q4 2022, but in a different order.
“Load shedding is expected to be the highest risk factor, followed by political instability, corruption, and high food and fuel prices. The fastest climbing risk factor, though, is (still) seen to be politicians not focusing on consumer needs.”
In conjunction with political instability and corruption – regarded as the second highest risk for Q4 2022 – Van Tonder said this indicates that political issues are becoming a growing risk to consumer finances.
Overall, he said there is very little optimism surrounding the economic outlook for Q4 2022. “Most people expect a deterioration in both the global and local economic environments paired with continued increases in inflation and a high unemployment rate,” he said.
As consumers prepare to weather the Q4 storm, load shedding is expected to continue to have a big impact on the economy.
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