Financially secure

finances deteriorated during the second quarter of 2021 following a gradual improvement since the second quarter of 2020 (when the index reached an all-time low of 35.4).”

All the sub-component scores were down, and all were in the “very exposed” bracket. The report looks at each of these in turn:

◆ Income vulnerability increased. “The main constraint to consumer incomes is the inability of the economy to create jobs for a large portion of the population. This made obtaining or retaining employment extremely difficult, which negatively influenced consumers’ earning prospects. In addition, the Covid-19 social relief grant of R350 per month came to an end in March.”

◆ Higher levels of expenditure vulnerability. “A larger number of key informants believed consumers’ expenditure was exceeding their income. The majority of informants were of the view that consumers generally tend to live beyond their means and do not demonstrate self-control when it comes to spending.”

◆ Savings vulnerability also increased. “A larger percentage of key informants disagreed with the statement that consumers’ ability to save had improved during quarter. This includes saving for retirement. Many informants also indicated that consumers did not have greater access to emergency savings. Many consumers have been forced to sacrifice saving in order to cover expenditure and service their existing debts.”

◆ Consumers were more vulnerable in terms of servicing debt. “Low interest rates assisted in limiting debt servicing costs, but given the pressure on income and expenditure, consumers had limited funds to repay debts.”

Worryingly, the report suggested that the youth (consumers below 39 years) are the most financially vulnerable sector of the population. “This corresponds to the economic struggles that this market segment faces, including high unemployment and the pressures brought about due to changes in life (such as getting married and having children),” the report says.

An important and equally worrying observation was that “the pandemic has undermined the feeling that long-term planning is important, with consumers having a survival mindset and not taking tomorrow into consideration”.

Most informants were of the view that consumer finances will remain volatile for some time to come, and the recovery from the pandemic and lockdowns could take more than two years.

In light of the worsening circumstances of so many South Africans, as indicated by the report, the government’s decision this week to reintroduce the Social Relief of Distress Grant was the right one, in my view.