South Africans are looking at ways of cutting costs across several expense categories – including gym, DSTV, and insurance – to make ends meet as the cost of living crisis persists unabated in South Africa.
This is according to InfoQuest’s latest survey, which noted that many South Africans are now taking significant risks to prioritise their shrinking disposable incomes amid challenging economic conditions.
To get an idea of what these categories are, InfoQuest – a leading South African online research company – asked consumers which policies/contracts they have cancelled over the past six months.
The research was conducted in May 2023, and 300 nationally represented consumers were interviewed.
According to the survey, gym memberships were the biggest loser, with almost one in four respondents claiming that they cancelled their membership over the past six months, while DStv was also a casualty at 18%.
Household contents insurance was also a big loser, with 10% of respondents claiming that they cancelled this insurance over the same period. This is followed by funeral policies (9%) and medical
aid (9%), the survey added.
Interestingly, younger consumers (aged 18 to 35 years) were more likely to cancel household insurance and medical aid, while the 25 to 34 age group were more likely to cancel funeral policies.
InfoQuest also noted that these decisions showed no significant differences in cancellation rates across various income brackets – showing that all South Africans are feeling the pinch of the rise in living costs in South Africa.
The rising cost of living in South Africa
This worrying trend and the risks involved – especially concerning the cancellation of insurance coverage – directly result from the immense financial pressures South Africans face in 2023.
According to Stats SA, annual consumer inflation slowed to 6.8% in April from 7.1% in March. However, this is still above the South African Reserve Bank (SARB) ’s target range of 3% to 6%.
This resulted in the SARB hiking interest rates by another 50 basis points on 25 May 2023, raising the cost of borrowing and existing instalments for South Africans.
For example, those who purchased a R2 million home just 18 months ago are now paying an additional R6,000 per month to service their bond.
Compounding the headwinds for cash-strapped South Africans is that stubbornly high inflation has meant that several other expenses have also seen notable increases in 2023, which are often even higher than the inflation rate.
Some of these include:
- Electricity tariff increases of between 17.6% and 21.9%, depending on the relevant municipality;
- Water tariff increase of between 6% and 14.9%;
- Property tax increases of between 4.4% and 8.9% (except Cape Town, which is decreasing by 1.1%);
- Vehicle price increases of 6.3% (new) and 8.1% (used); and
- Since 2021, petrol has increased by 56.7% and diesel by 58.6%.
These increases have resulted in even more expensive increases, such as food and, most notably, insurance products, which could partially influence South Africans’ decision to cut their contacts.
A good example of this is medical aid, as several insurance companies have increased their fees as of 1 April 2023 by well over the inflation rate – with an increase of between 6% and 11% – depending on which insurer you are with.
This may also be why some South Africans are cancelling their DStv, as they have also increased their subscription fees as of 1 April 2023. Multichoice increased its prices by an average of 4.3% across DStv’s satellite pay-TV portfolio.
“Unfortunately, the tough economic conditions are resulting in some consumers cancelling their contracts, but of concern is that this includes precautionary savings products such as insurance, medical aid and funeral policies.
“While it may be tempting to cancel personal insurance policies to save money, it is important to recognise the potential risks and consequences. It is crucial to evaluate the potential risks carefully, consult with professionals and make informed decisions based on individual circumstances,’ said infoQuest operations director Claire Heckrath.