Why South African consumers are feeling better about their finances

The state of South African consumers’ personal finances continued to improve during the first quarter of 2021 (Q1 2021) on the back of a recovery in the income of especially middle- and higher income groups.

Due to the important role income plays in consumer finances, it was the driving force behind the further improvement in the Momentum-Unisa Consumer Financial Vulnerability Index (CFVI) from the low point of 35.4 points registered in Q2 2020.

In Q1 2021, the CFVI improved to 49.7 points from 47.5 points in Q4 2020.

Although improving income earning prospects was the main driver behind consumers’ experience of less financial vulnerability, all the sub-indices of the CFVI continued to recover (all scores are higher than those last seen in Q4 2019, except savings):

  • The income index increased from 47.7 points in Q4 2020 to 50.2 points in Q1 2021.
  • The expenditure index improved from 49.2 points to 52.3 points over the same period.
  • The savings index was up 1.5 points to 48.8 points in Q1 2021.
  • The debt servicing index rose from 45.8 points in Q4 2020 to 47.5 points in Q1 2021.

Notwithstanding the improvement in the CFVI and its four sub-indices, the majority of consumers still feel financially exposed and insecure, with any small adverse event (e.g. pay cuts) likely to contribute to a large deterioration in the state of their personal finances, Momentum said.

The main reasons behind the changes in the four sub-index scores:


Income vulnerability decreased during Q1 2021. This suggests that more consumers were able to earn or increase their income. Compared to Q4 2020, a larger percentage of key informants were of the opinion that there has been a greater chance for consumers to retain or obtain employment during Q1 2021 as well as noting an improvement in the income earning prospects of consumers.


Lower levels of expenditure vulnerability were recorded for Q1 2021. This sub-component is supported by the recovery in employment. Compared to Q4 2020 a larger portion of key informants were also of the opinion that consumers’ expenditure did not exceed their incomes and therefore more consumers’ spending remained within budget during Q1 2021.


Savings vulnerability also decreased in Q1 2021. The continued improvement in savings can be attributed to both the recovery in income and more consumers living within their means. However, key informants indicated that consumers unfortunately did not have greater access to emergency savings in Q1 2021.


Consumers were less vulnerable in terms of debt servicing capabilities in Q1 2021. Low interest rates assisted in limiting debt servicing costs. Similar to savings, the recovery in income improved consumers’ ability to repay outstanding debts.


The main interventions or changes that key informants suggested for consumers to continue their financial recovery include:

  • An improvement in the local economy to stimulate job creation.
  • Financial discipline by limiting unnecessary expenditure and saving more.
  • Conduct financial planning, including setting attainable financial goals.
  • Increased financial literacy.
  • Additional income streams or starting their own businesses (adding to job creation).
  • Limit credit uptake and repay existing debts.

Momentum warned that consumer finances will remain volatile for some time to come following the initial shocks brought about by the Covid-19 pandemic and subsequent lockdown that started a year ago.

Key informants noted that South African consumers are resilient, and some have started to adapt, but to experience a long-lasting recovery in their financial situations, consumers will require external support in the form of job creation and skills development in especially poorer communities, it said.


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Why South African consumers are feeling better about their finances