Reality check for South Africans

Despite positive news and sentiment sweeping through consumer and business confidence over the past quarter, the reality is that household finances in South Africa are still under strain, and it will take some time for the good times to filter through into hard data.

According to the South African Reserve Bank’s (SARB’s) Quarterly Bulletin for Q3, household finances weakened over the period, hurt by slower income growth and stagnant employment.

Real personal disposable income (PDI) grew by only 0.6% qoq, slowing from 1% in the second quarter.

Economists at Nedbank noted that employee compensation recovered off a low base, but other income—profits, rents, interest, dividends—lost momentum. Lower levels of inflation were also a big help.

“Real compensation rose by 0.1% qoq after shrinking by 0.4% in Q2. The boost likely came from lower inflation,” it said.

Employment data on Q3 was murky. While the quarterly Labour Force Survey showed a 1.1% qoq increase in formal sector employment in Q3, the Quarterly Employment Statistics, which surveys companies directly, reported a 1.2% decline in formal employment over the same period.

The softening in household finances led to slower growth in consumer spending, which grew by 0.5% qoq in Q3, down from 1.2% in Q2.

Adding to the middling, if not bad, news, is that the household debt to income ratio was almost unchanged at 62.2% in Q3 after dropping to 62.1% in Q2 from 63% in Q1.

“Debt accumulation grew slightly faster than nominal income. Most credit categories increased as households used credit to finance essential spending, and debt affordability increased somewhat after the first interest rate cut in September,” Nedbank said.

The household debt service cost to disposable income ratio was also unchanged at 9.1%.

Encouragingly, household balance sheets improved further. Net wealth levels rose to 409% of PDI, up from 395% in Q2.

The market value of total assets also outweighed the rise in total liabilities. The rebound in share prices and the gradual recovery in house prices supported the market value of assets.

The savings drawdown continued in Q3, with the ratio of personal savings to PDI almost unchanged at -0.9% from -1 in Q2.

Nedbank said that despite the Q3 result, things are likely to improve in the final quarter of this year and throughout 2025.

“Lower inflation will boost real personal disposable income, and falling interest rates will reduce debt service costs,” it said.

“The cyclical upturn in response to easing monetary policy should also lift house and equity prices, contributing to stronger balance sheets and helping to restore financial health.”

The group also noted that, if used to reduce debt, the withdrawals from the two-pot retirement system could also help restore consumers’ financial health.

“These will gradually free more funds for discretionary spending,” it said.

Read: Trouble for house prices in South Africa – but the turn is coming