South Africans continue to struggle with their finances – citing job losses, salary cuts and reduced work hours

Research conducted by consumer credit reporting agency TransUnion shows that nearly two-thirds of South African consumers (61%) say their household income continues to be negatively impacted by the pandemic.

The data was collected before the third wave of Covid-19 and subsequent civil unrest that rocked the country in July.

TransUnion’s ongoing Consumer Pulse (formerly Financial Hardship) study shows that nearly nine out of 10 (88%) impacted consumers remained ‘highly concerned’ about their ability to pay their bills and loans.

Credit obligations were the top concern, with informal mashonisa loans (44%), personal loans (37%) and retail accounts and credit cards (30%) at the highest risk of going unpaid among those who have those bills and loans.

In all, 43% of consumers surveyed reported being in arrears for a bill or loan in the past three months.

“While there have been clear signs of recovery in South Africa’s economy and the overall state of consumer finances, the fact is that many consumers are still under severe financial pressure. It also remains to be seen what effects the third wave lockdowns and recent civil unrest will have on the consumer wallet,” said TransUnion South Africa’s head of financial services, Andries Zietsman.

The main reasons for lower household incomes were job losses, salary cuts and reduced work hours. Four in 10 (40%) surveyed consumers said someone in their household had lost their job, 38% said someone in their household had their salary reduced, and 28% reported lower work hours in the past month.

Only 4% of surveyed households said their finances had fully recovered after having their household income decrease at some point during the pandemic, with just under half (48%) of those impacted reporting that they had not recovered.

However, consumers remained upbeat: 75% of all surveyed said they were optimistic about the future, with 52% confident their household finances will fully recover

To speed this recovery, 18% had started doing gig work, 17% had started a small business, and 17% had begun selling goods informally.

Opportunities for credit growth

Consumers have a clear appetite for credit, with 85% of households considering access to credit extremely, very or moderately important, but only 27% believed they currently had sufficient access to credit.

A third (33%) planned to apply for new credit or refinance existing credit within the next year, with a new personal loan (39%), credit card (33%), and mortgage, home loan or bond payment (30%) at the top of the list.

Forty-five percent of surveyed consumers considered applying for new credit or refinancing existing credit but ultimately decided not to. Just over a third (34%) believed their application would be rejected due to their income/employment status; 30% felt the cost of new credit or refinancing was too high; and 26% thought they’d be rejected due to their credit history.

Read: South Africans are struggling to pay off their credit cards – here’s how much they owe