South Africans are living on the edge
A new report from Sanlam, South Africa’s largest insurer, shows that most South Africans are not prepared for a financial setback.
The second instalment of Sanlam’s Financial Confidence Index looks at “South Africa’s temperature” regarding the nation’s shared financial confidence.
It shows that nearly half of the population has a below-average or lower Financial Confidence Index (FCI).
Overall, South Africans’ FCI remained stable, with an index score of 47 out of 100, with slight improvements in Financial Self-determination and Financial Well-Being.
“Our research partner, Africa Response, surveyed 1,610 individuals to index three key components of financial confidence: Financial Self-determination (FSD), Financial Resilience (FR), and Financial well-being (FW),” said Mariska Oosthuizen, Sanlam’s Chief Marketing Officer.
“What stood out was the astuteness and optimism of Gen Z, which had higher FSD and FR than other generations, possibly due to digital savviness opening access to information.”
That said, the survey showed that just two in five people agreed that they could withstand a financial setback or achieve financial freedom.
Sanlma said that most people appear to live payday to payday.
In addition, only half said that they are building wealth and not just paying off debts.
In addition, just 34% had insurance that adequately covered their financial risks, and only 40% had an emergency fund or savings.
“Most respondents do not feel like they could withstand a financial setback. Only half feel in
control of their monthly finances,” said Oosthuizen.
“This all speaks to South Africa’s persistent household savings crisis, at -1.10% (Q3, 2023) – compared to Morocco, for example, at 28.3% (according to Trading Economics, April 2024).”
“When people are living payday to payday, it can feel nearly impossible to save for future setbacks.”
Moreover, only 42% of respondents said that they have the financial freedom to make choices they enjoy in life.
“This could foster feelings of sadness, hopelessness, helplessness, anxiety, resentment, envy, self-loathing, etc,” said psychologist Sanam Naran.
“A lack of financial freedom could also cause a dependence on survival and making ends meet – this can be incredibly disempowering and have a knock-on effect on an individual’s self-esteem and confidence.”
Income pain
When looking at the FCI, a strong correlation exists between income and financial confidence.
Individuals with earnings under R8,000 a month had the lowest Financial Self-Determination (FSD) index score of 48.
This was far lower than the index score of 69 for those earnings of R20,000 per month.
“Low-income earners are often trapped in a cycle of survival behaviours. When you’re struggling to make it to month-end, you become preoccupied with the present, with limited capacity to look to the future.”
That said, when looking more positively, there was an eagerness amongst respondents to pursue financial learning.
“Positively, 69% of South Africans said they continuously build their skills to increase their earning power, and 56% said they believe their personal finance competencies are increasing each year,” said Mncwabe.
“Financial literacy is pivotal to building a life of financial confidence. People have an immense appetite to learn. South Africa’s financial services sector has a duty to keep innovating to make education more accessible.”
Loading ...
