South African consumers are running out of money before the end of the month – and salaries are shrinking

New data published by financial services firm Sanlam shows that South African consumers are struggling to shake off the impact of the Covid-19 pandemic on their finances.

Sanlam found that 56% of polled South Africans saw their savings decrease since the advent of Covid-19. Conducted as part of Sanlam’s Letters to My Pre-Covid-19 Self campaign, the survey found that 59% of 1,200 respondents said they have been forced to change their spending habits.

More than half (54%) of respondents said they are not able to make their money stretch to month-end, while poor financial health is seen as a serious stressor for relationships and mental health.

Data from FNB prior to the start of the global Covid-19 pandemic showed that middle-income South Africans relied heavily on debt with some using as much as a quarter of their monthly income to pay interest on debt.

FNB said that its data showed that more than half of middle-income consumers spend their income in less than five days after receiving it. The lender categorises middle-income consumers as those who earn a gross monthly income of between R7,000 up to R60,000.

A survey published by World Wide Worx, and commissioned by TymeBank, showed that while many South Africans have a monthly budget, 76% still run out of money before the end of the month.

Sanlam’s survey investigated the impact of the pandemic, through the lens of asking people what they wish they’d known or done differently before coronavirus struck.

Farzana Botha, segment solutions manager at Sanlam Savings, said: “Findings from the survey were humbling and thought-provoking. It’s clear this pandemic has caused many to re-evaluate what’s important. One silver lining is that 43% of participants said they’ve started talking about money more, 32% have set new financial goals and 31% said they’ve relooked their financial plans.

“Money talk is often taboo, so it’s encouraging to see households deciding to walk a closer financial journey together, during these tough times.”

Findings from the survey:

• 18% of respondents had no savings to start with. With no financial buffer, these individuals were seriously impacted by the pandemic;
• 55% of people said financial pressure, coupled with all the uncertainty tied to the pandemic, had put strain on their relationships;
• 31% of respondents cited depression and anxiety as their main relationship stressor; 30% said loss of employment or income;
• 57% of South Africans cited financial stress as having had the most major impact on their mental wellbeing;
• 21% of South Africans started using prescription medication to help with stress and anxiety.

“We continually see the impact money has on people’s wellbeing and relationships. At Sanlam, we are committed to assisting South Africans to live with confidence by empowering people through financial knowledge and tools. We encourage individuals to reach out to a financial planner to create a financial plan with goal-specific outcomes,” said Botha.

Meanwhile, the latest debt index from debt counselling company DebtBusters reveals that consumers’ debt situation deteriorated in the third quarter of the year. Data from DebtBusters showed that the average net income required to pay off monthly debt was 59%.

Among other things, the Q3 2021 debt index also showed that real income has shrunk by 24% over the past five years, while the average debt-to-net-income ratio is now an alarming 116% across all income bands or 145% for those taking home R20,000 or more.

In addition, levels of unsecured debt are on average 25% higher than five years ago, with loan sizes having increased 50%. On average, consumers have 25% more unsecured debt in 2021 compared to 2016, those taking home R20,000 or more have unsecured debt levels that are 59% higher than in 2016, DebtBuster said.

Read: South Africa’s middle class is in big trouble