South Africans are getting crushed by living costs

 ·23 Apr 2024

In South Africa, around 40% of adults are reportedly resorting to borrowing money to buy food, while two out of five individuals have gone without electricity in the past 12 months because they could not afford it.

This is according to FinMark Trust’s latest study, the FinScope Consumer South Africa 2023, which showed that living expenses account for 85.3% of the average South African’s monthly income (based on a sample size of 5,000).

For many, this means that the challenge of allocating money towards savings, investments, or leisure activities becomes nearly impossible once they have paid their bills.

Monthly expenses

According to the FinScope study, it is estimated that groceries make up 30.4% of expenses, energy 11.5%, transportation 9.1%, communication 8.8%, and routine household maintenance, rental and rates make up around 8.5% each.

“It is considered highly burdensome to allocate more than 10% of income to household energy expenses, including electricity,” said Jabulani Khumalo, senior data and analytics specialist at FinMark Trust.

“The year 2024 may not alleviate the cost to consumers, as they have recently endured a staggering 12.74% increase in Eskom’s tariffs, with no indication of interest rates decreasing anytime soon,” he added.

These rising costs coupled with financial constraints saw two out of every five individuals in the study reporting that their homes were without electricity in 2023 purely based on affordability.

This would have an even worse impact on individuals who earn the minimum wage.

According to research from the Pietermaritzburg Economic Justice and Dignity group, electricity and transport alone take up over 60% of a minimum wage worker’s expenses (R2,586.92/R4,270.56).

This means that minimum wage workers will spend at least 54.3% less on food for their families, leaving pretty much no room to consider savings, investing, or leisure.

Long-term impacts of the rising cost of living

“Since a large portion of South Africans’ incomes are allocated to cover necessities, people have less money available for savings, investments and leisure activities, which makes it increasingly difficult for them to make long-term plans and achieve their financial goals,” said Khumalo.

According to the FinScope results, 30 million economically active adults in South Africa, or six out of seven (86%), do not have a retirement plan. Additionally, about two-thirds of middle-class individuals (R9,999 – R20,000 a month) do not have retirement financial products.

This is because “priorities shift from saving for the future to meeting immediate financial demands,” said Khumalo.

Additionally, these immediate financial demands have meant that South Africans have increasingly been relying on credit.

In 2023, more than 27 million South Africans were active credit users, with around 35% of this number borrowing money or using credit to pay for unforeseen bills or everyday needs, resulting in a rise in personal debt.

10 million out of these 27 million are three months or more behind in debt repayments or facing legal action and adverse listings.

There is approximately R2.31 trillion of debt, with the Consumer Credit Market Report showing that this comprises:

  • Mortgages – R1.21 trillion (52.23%);
  • “Secured credit agreements” – R501.90 billion (21.71%);
  • Credit facilities – R317.62 billion (13.74%);
  • Unsecured credit – R221.57 billion (9.58%);
  • Developmental credit – R61.12 billion (2.64%);
  • and Short-term credit – R2.20 billion (0.10%).

Read: The cost of living reality for South Africa

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