What financially stressed South Africans are doing to cut monthly costs

Insurance group Santam has published its 2020/2021 barometer on insurance trends, showing that South Africans are cutting back on a number of luxuries to make ends meet.

More than 950 respondents including consumers, corporates, commercial users and intermediaries across the country were polled during the study, which was conducted between 2020 and 2021.

While the barometer covers broad insurance trends, it also focused specifically on the impact of Covid-19 and how it has changed the financial and insurance decisions of South African households.

The report shows that 81% of consumers reported a negative impact due to the pandemic, with 60% reporting a direct financial loss such as reduced salaries or unemployment.

81% of those who experienced financial loss could use savings to see them through, while 19% were forced to borrow money from friends and relatives.

The data shows that South Africans also have clear priorities on the expenses they are cutting back on, with 59% of respondents indicating that they reduced restaurant outings and food takeaways to cut back on spending.

The biggest cost-saving measures were:

  • 45% reduced their travel/petrol, clothing, footwear, accessories expenditure;
  • 33% cut back on hobbies, sports and gym expenditure;
  • 28% cut grocery expenditure;
  • 23% reduced their TV subscriptions;
  • 19% cut back on domestic travel;
  • 15% reduced their cellphone contracts;
  • 10% slowed on their repayment of debt;
  • 10% cut back on school fees.

Middle-income South Africans are not optimistic about the outlook for their household finances going forward, the latest Consumer Confidence Index (CCI) from the Bureau for Economic Research (BER) shows.

“The alarming decline in formal sector employment during the second quarter – a drop of 375,000, or 3.5% quarter-on-quarter – in all likelihood hit middle-income households the hardest,” said FNB economist Siphamandla Mkhwanazi.

“The violent looting and arson that ravaged shopping malls, warehouses, factories and small businesses in KwaZulu-Natal and Gauteng during July would only have exacerbated the employment prospects for middle-income earners in particular during the third quarter.”

Furthermore, middle-income consumers are also less likely to work from home than high-income earners, implying that soaring petrol prices – up by nearly R3.50 per litre since January – would also have a disproportionally negative impact on this group, he said.

Adapting

The Old Mutual Savings & Investment Monitor (OMSIM) for 2021 showed a similar trend in cost-cutting over the last 12 months for households hit by the Covid-19 pandemic.

Similar to the Santam barometer, the OMSIM showed the largest reduction in spending on going out, clothing and travel over the past year. This was the case for all income levels.

However, households didn’t just cut back on spending in various categories, they also adapted in other ways – like switching brands or downgrading their lifestyles in some capacity.

Here, the OMSIM shows that switching to different supermarkets was the most common shift in behaviour, followed by taking cheaper entertainment packages or dismissing their domestic worker and taking up household chores themselves.


Read: Where South Africa is heading for the rest of the year, according to economists

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What financially stressed South Africans are doing to cut monthly costs