At Wonga, we understand the financial challenges faced by South Africans as economic pressures continue to mount. To get more insight into consumer spending, we ran our Consumer Spending survey in May and June 2024 and had almost 4500 respondents tell us how they are spending their money. The survey provides revealing insights into how individuals are managing their finances amid rising costs.
Increasing Costs and Shrinking Wallets
The recent escalation of living expenses has forced many South Africans to make tough choices about where their money goes. Our survey highlights a sobering trend: as the cost of essentials become more expensive, people are having to cut back their grocery spend to pay for medical and safety categories such as medical aid, insurance and home security.
For many, this adjustment is not just about tightening belts but finding new notches altogether. Over half of the survey respondents indicated that they unable to save any money each month, with 59% not contributing towards their retirement. These savings number indicate financial insecurity extending into the future, especially as the cost of living continues to climb.
The Credit Crunch
One of the more alarming trends identified in our survey is the high percentage of income that goes towards debt repayment. On average, individuals are dedicating about 19% of their income to serving personal loan repayments. With the interest rate at its highest level in years, those who have personal loans with interest tied to the repo rate are feeling the pinch.
However, there is some respite on the horizon – many economists are predicting a reduction in the repo rate as early as September which will reduce loan repayments on long term personal loans, vehicle asset finance and home loans.
Adjusting Priorities in Tough Times
Our survey also sheds light on how South Africans have reallocated their budgets. Essentials like housing, healthcare, and education remain priorities, but even these are under pressure as people attempt to juggle their limited resources. The majority of respondents noted significant increases in the cost of food and groceries, with other essentials like electricity and fuel also climbing.
Interestingly, while luxuries are the first to be cut, many respondents indicated that they would not compromise on savings, insurance and school fees, viewing them as critical investments in their future security and their children's education.
What Can Be Done?
The findings from Wonga’s survey are a call to action. For households, regular reassessment of spending priorities and budget adjustments are essential personal finance strategies.
Businesses, particularly in the financial sector, must also play a role by offering fair, transparent financial products that support rather than exploit those in need. As highlighted by Wonga’s efforts, responsible lending practices are not just ethical but are crucial in helping alleviate the financial strain on consumers.
The Silver Lining
Many figures in the economy are pointing towards financial recovery for consumers – the expected interest rate cuts, recent reduction of the fuel price and the slowdown in food and grocery inflation are all positive markers. Those that have been able to budget and plan effectively through these turbulent times over the last thirty-six months, have set themselves up with good habits to carry forward.
