Good signs for middle-class South Africans

Financial services company FNB says the sustained reduction of interest rates and relaxation of lockdown levels is providing a significant boost to the recovery of average income and cash flow among salaried middle-class consumers who hold full-time or formal employment.

The bank has published new insights based on the income trends among its retail and private banking customers who earn a monthly gross income of between R10,000 to R60,000.

FNB said that the financial position of the average middle-income customer is now approximately on par with levels recorded in February 2020, before the implementation of the national lockdown.

Additionally, spend patterns of consumers are showing recovery with most categories like groceries and entertainment back to normal. However, categories like travel are still significantly lower due to the travel bans instituted during lockdown.

By comparison, average income among informally employed and self-employed consumers continues to lag, as a result, this income group may take longer to regain their usual average income levels.

“The lockdown has been the toughest experience for consumers, emotionally and financially. However, the income recovery and improving cash flow among middle-income consumers bodes well for the economy as middle-class consumers have significant spending power,” said chief executive of FNB retail and private banking, Raj Makanjee.

“The timely adjustment of interest rates has been instrumental in cushioning consumers who are servicing debt against severe financial difficulty.

“Similarly, our cashflow relief measures have allowed our customers who earned partial or no income during lockdown levels 4 and 5, to manage the impact of this difficult period on their finances,” he said.

FNB said that the average income of consumers who are employed by SMEs (employing less than 10 people) was impacted the most over the course of lockdown.

The bank estimates that half of people employed by these SME businesses have seen a drop of at least 15% in average income. However, only one in five of those employed by larger companies (1,000 employees or more) experienced an average income drop of 15% or more.

“By having these meaningful conversations, we gain better understanding of our customers’ situations and have greater insight to practically assist them with freeing up cash flow.

“Specific spending solutions across our customers’ credit, essential and lifestyle spending are assessed for each customer to determine how best we can assist them, furthermore, we are helping customers to align their spending to the things that are important to them in order to achieve their financial goals,” said Makanjee.


Read: South Africans are starting to spend again

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Good signs for middle-class South Africans