{"id":442620,"date":"2020-10-22T09:21:21","date_gmt":"2020-10-22T07:21:21","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=442620"},"modified":"2020-10-22T09:21:49","modified_gmt":"2020-10-22T07:21:49","slug":"disposable-income-has-halved-in-south-africa","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/442620\/disposable-income-has-halved-in-south-africa\/","title":{"rendered":"Disposable income has halved in South Africa"},"content":{"rendered":"

The real disposable income of South African households contracted by 49.7% in the second quarter of 2020, says the Parliamentary Budget Office (PBO) citing data from the Reserve Bank.<\/p>\n

In a presentation ahead of finance minister Tito Mboweni’s Medium-Term Budget Policy Statement (MTBPS) next week, the PBO said that household consumption also dropped markedly by 49.8% in the second quarter of 2020, following a marginal increase of 0.2% in the first quarter.<\/p>\n

The sharp decline reflected reduced outlays on all categories of goods, the PBO said.\u00a0 “Spending on durable and semi-durable goods contracted the most because most were classified as non-essential during the lockdown.<\/p>\n

“Overall, consumer spending by households contracted by 7.5% from the first half of 2019 to the first half of 2020.”<\/p>\n

The PBO said that this decline was consistent with the decline in both consumer confidence and credit extension to households.<\/p>\n

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This aligns with data<\/a> <\/strong>from payments clearing house BankservAfrica which shows that the last few months have seen massive disruptions to the country\u2019s average take-home pay, as a number of payments were either suspended, terminated or adjusted.<\/p>\n

The average take-home pay in August was\u00a0R14,008 in nominal terms<\/strong>\u00a0and\u00a0R11,893 in real terms<\/strong>. However, it is unlikely that the real average take-home pay will continue on this positive trend as the next two months had a relatively high average real take-home pay in 2019.<\/p>\n

\u201cA more meaningful indication of the real salary trend in South Africa at present is the average real take-home pay for the first eight months of 2019, which was R12,200 per month, indicating that the August 2020 number is nearly 2.5% lower than the same reporting period in 2019,\u201d said economist Mike Sch\u00fcssler.<\/p>\n

Debt\u00a0<\/strong><\/p>\n

The PBO’s presentation also shows that there has been a decrease in household debt in the second quarter of 2020 \u2013 its first decline since the third quarter of 2002<\/p>\n

The ratio of household debt to disposable income increased significantly from 73.6% in the first quarter of 2020 to 85.3% in the second quarter.<\/p>\n

“The quarter-to-quarter decline in nominal disposable income exceeded the decline in household debt.<\/p>\n

“The outstanding balances of most categories of credit extended to households decreased during the national lockdown.<\/p>\n

“This decline in credit extension was probably due to socioeconomic uncertainty about household saving and spending patterns.”<\/p>\n

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Data from the National Credit Regulator (NCR) \u00a0from March 2020 to June 2020 shows that the number of credit agreements<\/a> <\/strong>entered into decreased by 47.73% quarter-on-quarter from 3.93 million to 2.05 million.<\/p>\n

In terms of credit granted for the quarter ended June 2020:<\/p>\n