Crushing debt is keeping South African consumers from saving money at the end of each month, and forcing them to get creative in order to stretch their salaries further.
This is according to the Old Mutual Savings and Investment Monitor which shows, in 2016, debt as a % of income spend is outpacing savings across most household types in South Africa, eating into savings, as consumers tighten their belts.
While saving levels as a % of income spend is at similar levels to 2015 (at 15%), debt has increased by 4 percentage points to 16%, while household consumption has dropped by five percentage points to 63%.
In just five years, the cost of living has increased dramatically, while saving rates have declined, the report showed. According to the monitor, only 42% of South African have banked cash savings.
Worryingly, personal loans are on the rise across all income groups, with all types (from banks/financiers, friends and relatives, and micro-lenders) at the highest point in years.
This is what South Africans are doing to stretch their budgets and save money each month:
The group also listed the things South Africans were most willing to sacrifice to save money.
Head of Old Mutual Investment Group’s Economic Research Unit, Rian Le Roux said that the over-reaching message is clear: people need to save more.
“It is already hard for many people to save – and it is going to get even harder. Investment returns will be lower in future; so, just as it becomes more difficult to save, it becomes necessary to do just that,” he said.
According to Le Roux, people who can save, simply don’t save enough, and when they claim they cannot save, it’s more often the case that they just prefer not to.
This attitude, he said, has potentially dire consequences for the future, as many experience a “painful” drop in living standards in retirement.