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Survey shows how economic distress erodes South Africans' savings culture
Survey shows how economic distress erodes South Africans' savings culture

The Citizen

time2 days ago

  • Business
  • The Citizen

Survey shows how economic distress erodes South Africans' savings culture

Consumers find it difficult to stick to a savings culture while the economy causes so much financial distress. Concerning insights from the latest Debt Rescue consumer savings survey highlight a severe disconnect between South Africans' desire to save and their inability to. This is in no small part due to South Africa's struggling economy and its impact on consumers, painting a grim picture of a nation living from month to month and on the brink of financial ruin. Neil Roets, CEO of Debt Rescue, says with the majority of consumers now barely even able to live from pay cheque to pay cheque and many relying on freelance or seasonal work, savings are becoming a luxury most South Africans can no longer afford. He emphasises that they need urgent, practical financial support to help households build financial resilience in an increasingly unaffordable economic climate. 'At least two-thirds of our respondents say that despite prioritising saving every month, they are finding it close to impossible to do so now, due to financial hardship and challenges resulting from the country's economic downturn.' ALSO READ: Ordinary South Africans will feel impact of US tariffs Survey shows consumers are trying to continue savings culture Key insights from the survey, which coincides with National Savings Month in July, show that South Africans are desperately trying to secure their future finances and shield their families from even greater economic duress, but are failing miserably due to immediate basic needs barely being met. A total of 48% of respondents report that they cannot cover basic essentials like food, energy, housing and healthcare, while another 41% say they only just manage their essential day-to-day living costs. Roets points out that there is clearly no lack of will on the part of consumers. 'While it is encouraging that 87% of respondents are actively trying to improve their saving habits, the resolve to save is simply not enough in the face of serious financial strain.' He says the unsustainably high cost of living is the primary barrier, with nearly half of those polled (47%) citing the high cost of living as their main barrier to saving, while 27% attribute unexpected expenses such as medical bills as the primary reason they fail. ALSO READ: Latest petrol price increase puts SA consumers on backfoot again This is how savings culture is failing in SA Some of the stand-out insights from the survey are: 35% of respondents prioritise building an emergency fund as their most important savings goal, highlighting how many are conscious of the reality that they might be living one crisis away from financial collapse. Almost a third (27%) do not save any of their income, while 29% save less than 5%. Only 18% manage to save more than 10% of their income monthly. Saving behaviours are worsening: 26% of people polled say they save less now than they did a year ago, while 23% say they stopped saving altogether. Only 20% managed to increase their savings. ALSO READ: Are you a young professional? Here's how to avoid the debt trap Beware: hope is not a strategy – avoid online gambling to save your financial problems On the back of the financial travails that plague millions of South African households, a mammoth new social ill has reared its ugly head and is far bigger than most people realise, Roets says. Online gambling increased by 550% in only four years with no sign of a reprieve, reaching a turnover of R1.14-trillion in the 2023/24 year, or nearly 17% of GDP. The best available research shows that it is mainly low-income South Africans who gamble away an astonishing share of their monthly pay, out of sheer desperation, undoubtedly hoping for big winnings that will somehow transform their circumstances. 'Meanwhile, the national consumer debt crisis is deepening with the latest figures showing that the debt to disposable income ratio for South African households has increased to a current level of around 75%, which is higher than the long-term average of 70% according to the South African Reserve Bank (Sarb). 'What all of this points to is that, while South Africans want to save, they simply do not have the means to do so and are relying more and more on credit, the state and/or turning to risky behaviours like gambling to manage everyday living costs. 'Consumers have already started to downgrade their lifestyle costs or cut them out completely, and this is very concerning in areas such as insurance, which places them in a vulnerable situation.'

Ordinary South Africans will feel impact of US tariffs
Ordinary South Africans will feel impact of US tariffs

The Citizen

time10-07-2025

  • Business
  • The Citizen

Ordinary South Africans will feel impact of US tariffs

South African consumers already battle to make ends meet in difficult economic conditions and the US tariffs will make it even worse. US president Donald Trump's import tariffs will threaten South African jobs and livelihoods, with ordinary people feeling the impact of the tariffs although they are imposed at government level. Neil Roets, CEO of Debt Rescue, says the US' decision to impose a 30% tariff on all South African exports from 1 August is more than just a shift in trade policy. 'It is a direct threat to South African jobs, export industries and consumer financial stability.' The tariffs will significantly increase the cost of South African goods in the American market, affecting key export sectors, including agriculture, wine, metals, vehicles and manufactured goods, as US buyers are likely to reduce orders or turn to alternative suppliers. The result will be fewer exports, slower production and inevitable job losses in South Africa, he says. 'Tariffs may be imposed at government level, but the real impact will be felt by ordinary people. When exports drop, local businesses are forced to scale back. That means job losses, reduced income and financial instability for thousands of South Africans who are already buckling under a financial burden that has driven millions of households to the edge of despair. 'Against the grim backdrop of recent unsustainable price increases in essentials such as food, soaring electricity prices and municipal rate hikes, the impact of this tariff hike will push millions of households towards financial disaster.' ALSO READ: Trump's new 30% tariff less about trade and more about power US tariffs will affect thousands of jobs Roets pointed out that the South African export economy is deeply connected to employment across a wide range of industries, including agriculture, manufacturing, mining and logistics. From production to packaging and distribution, these sectors depend on stable global demand to support thousands of jobs, he says. 'Tariffs of this magnitude will disrupt supply chains and shrink order volumes, placing immense pressure on these already fragile industries. 'Fewer exports translate directly into fewer shifts, fewer contracts and ultimately fewer jobs. It is a chain reaction and it puts enormous pressure on a labour market that is clearly already under stress, with unemployment figures now at an unprecedented 32.9%.' Roets points out that many support industries will also suffer. Suppliers, logistics providers and service-based businesses that depend on export activity could experience significant downturns, with further consequences for employment and economic output. 'Although the tariffs target trade between the two countries, South African consumers will be among the hardest hit. As businesses cut back and income streams dry up, families will face increased financial insecurity, at a time when households simply do not have the capacity to absorb yet another shock. 'This tariff will not just hurt exporters, it will affect people's ability to pay their rent or bond, buy groceries and keep up with their loans.' ALSO READ: US tariff pause ends on 9 July: Tau says what happens now Wide consequences of 30% US tariffs Roets points out that right now, consumers have little financial cushion to fall back on. 'As disposable income drops and debt levels rise, household financial distress is set to worsen.' He says the impact of the 30% tariff imposed on the country will have widespread consequences. 'While South Africa's inflation rate remains relatively contained, the risk of rand depreciation due to the anticipated drop in exports and investor concern could force the South African Reserve Bank to pause or delay any plans to cut interest rates. Conversely, a weaker rand would increase the cost of imports like fuel, food and medicine, driving imported inflation. 'Even if the Reserve Bank wants to support struggling consumers, rand weakness could limit their options. This means no short-term relief for people already stretched to their financial limits.' The tariffs will also be a blow to economic recovery and confidence as it comes at a time when the South African economy is already navigating slow growth, high interest rates and structural challenges, he says. 'The manufacturing and agricultural sectors were expected to support growth and job creation in 2025, but the US tariffs could put that recovery on hold. Investor confidence may also weaken, and business expansion plans could be delayed or cancelled. 'The reality is that we do not have the luxury of absorbing a blow like this. Every job matters. Every export deal counts. And any additional pressure on households sets us back.' ALSO READ: Why South Africa must act fast after Trump's tariff blow South Africa is talking with US about tariffs South Africa is actively engaging the US in ongoing negotiations and has shown willingness to adjust its trade framework to preserve critical economic relationships. However, the timelines involved in these diplomatic processes offer little comfort to businesses and consumers facing immediate uncertainty, Roets warns. 'The only light at the end of this tunnel is the possibility of South Africa's president Cyril Ramaphosa successfully negotiating a new trade deal with Trump before 1 August 2025.' In addition, the tariffs pose an unacceptable risk in the midst of a jobs crisis, he says. 'South Africa's official unemployment rate remains at a staggering 32.9%, with millions of people already excluded from formal economic participation. 'In this context, any disruption to export industries, which form a backbone of industrial employment, is a risk the country cannot afford. Consumers are already doing everything they can to survive, cutting back, borrowing more and working extra hours. They have nowhere left to turn. 'A tariff on trade is, in effect, a tax on jobs. And South Africa simply cannot afford any further job losses right now.' Roets urges government, trade partners and the private sector to do everything possible to prioritise economic stability, job preservation and consumer protection as the country navigates this serious development. 'The livelihoods of millions depend on it. Sadly, many more millions of households will turn to loans and credit facilities simply to get by.'

Disturbing survey reveals borrowing now a lifeline in SA
Disturbing survey reveals borrowing now a lifeline in SA

The Citizen

time25-06-2025

  • Business
  • The Citizen

Disturbing survey reveals borrowing now a lifeline in SA

Two-thirds of South Africa's credit-worthy consumers who took part in a Debt Rescue survey stated that they cannot repay their debt. Disturbing results from a new survey of credit-worthy consumers show that borrowing has now become a lifeline for many South Africans as they become unable to repay their debts due to macroeconomic pressures beyond their control. Neil Roets, CEO of Debt Rescue, says that disturbing insights from the survey show that 41% of respondents indicated they defaulted on their credit cards over the past year, while 30% missed payments on retail store accounts. 'Credit cards and store accounts are the two most commonly used forms of credit for day-to-day expenses because they are existing facilities consumers have access to. They are now becoming increasingly unaffordable while providing the only lifeline for many consumers.' In addition, the survey outcomes show that 24% of people polled also defaulted on their personal loans, with 31% of respondents attributing this to unexpected expenses and 21% to loss of employment. ALSO READ: Most South Africans use personal loans to make ends meet 50% of respondents cannot afford necessities Roets says underlying this escalating debt crisis is the inability of half of the respondents (50%) to afford basic necessities such as food, electricity, or fuel due to a lack of available funds, with a full 50% saying they had to turn to credit to buy food, electricity, or fuel in the past 12 months. 'This points to the widespread financial distress many South African households find themselves in, due to economic pressures which have seen living costs skyrocket over the past few years while there has been very little in the way of financial relief in terms of interest rates, cost of living and tax reductions. '65% of the respondents said current economic conditions are significantly affecting their ability to repay debt,' he adds. South African consumers are drowning in debt with no easy way out and the new Eighty20 XDS Credit Stress Report for the first quarter of 2025 confirms this, showing that middle- to high-income earners are feeling the pinch as well. ALSO READ: This is how SA consumer class is cutting costs South Africans unable to repay loans even after borrowing more Statistics from the report paint a grim picture, with figures showing the alarming increase of R130 billion (5.3%) in loan balances from 2024 to 2025 and an increase of R25 billion (13.7%) on overdue loan repayments. This extends to home loans with overdue payments up by 21.5%, while there has also been an alarming surge in credit card debt which is up by 8.7% from 2024 and of the 350 000 new credit users, 53% have already missed payments. 'These numbers reflect the reality of life right now for millions of South Africans who are unable to keep up with paying their rent, car payments, groceries and school fees, while they are defaulting on all sources of debt and credit. This is not a case of overspending on luxuries but simply a means to financially get by,' Roets warns. He has been sounding the alarm for well over a year now. He says the elephant in the room is, of course, the many millions more who do not qualify for credit and are hanging on by a very thin thread, with the latest statistics showing that 25% of the population now live below the food poverty line according to the World Bank and over 30 million people living below the upper-bound poverty line of approximately R1 634 per month. ALSO READ: What does the future hold for the youth? Most 24-year-olds in debt 62% of South Africans living in poverty According to ISS Africa, figures for South Africans living in poverty have hovered around 62% in recent years, and on the current growth trajectory, this is set to inch down marginally to 60% over the next decade. Roets says this is largely the result of escalating food, energy, water and fuel costs, driven by an economy in deep trouble, which has led to the current unsustainable unemployment level of 32.9% of the population. 'It is only possible to reduce unemployment with a rapidly growing economy and the figures showing economic growth of just 0.1% in the first quarter of 2025 fail to inspire much hope. 'While 27% of people polled by Debt Rescue said they are compelled to take on part-time jobs or freelance work to increase their income – simply to meet the monthly needs of their families and themselves, many are simply unable to extend their working hours to accommodate earning an extra income and taking on debt becomes the only other alternative.'

Inflation is easing, but debt is up
Inflation is easing, but debt is up

Daily Maverick

time24-06-2025

  • Business
  • Daily Maverick

Inflation is easing, but debt is up

Inflation may be slowing, but consumers are drowning in debt and defaulting on essentials. Although inflation is slowing, South Africans are still drowning in debt. Two-thirds of South Africa's credit-worthy consumers who took part in a Debt Rescue survey stated that they cannot repay their debt because of macroeconomic pressures beyond their control. And DebtBusters' Debt Index for the first quarter of this year reported numbers just as bad – 91% of consumers who applied for debt counselling in the first quarter had a personal loan and 37% had a one-month loan, also known as a payday loan. Over the past nine years, electricity tariffs have increased by 135%, the price of petrol has risen by 88% and the compound effect of inflation is 52%. As a result, consumers who applied for debt counselling in Q1 2025, on average, needed 69% of their take-home pay to service debt. The most vulnerable consumers, taking home R5,000 or less per month, use 76% of their income to repay debt. Those earning R35,000 or more spend 77% on servicing debt. The ratios for these income groups are the highest since DebtBusters started analysing the data in 2016. 'It's clear that while consumers may feel a little more positive, personal loans, especially one-month loans, remain a lifeline for many because income has not kept pace with rising expenses,' says Benay Sager, executive head of DebtBusters. Debt Rescue CEO Neil Roets says 41% of people have indicated that they have defaulted on their credit cards over the past year, and 30% have missed payments on retail store accounts. 'These are the two most commonly used forms of credit for day-to-day expenses because they are existing facilities that they have access to, which are now becoming increasingly unaffordable while providing the only lifeline for many consumers,' Roets notes. The Debt Rescue survey outcomes show that 24% of those polled cited defaults on personal loans, with 31% attributing this to unexpected expenses and 21% to loss of employment. 'A total of 65% of those surveyed said that the current economic conditions are significantly affecting their ability to repay debt,' Roets said. 'These numbers reflect the reality of life right now for millions of South Africans who are unable to keep up with paying their rent, car payments, groceries and school fees, and are defaulting on all sources of debt and credit. This is not a case of overspending on luxuries, but simply a means to financially get by,' warns Roets, who has been sounding the alarm for well over a year now. The elephant in the room is, of course, the many millions more who are not credit compliant and hanging on by a very thin thread. The latest statistics show that 25% of the population live below the food poverty line, and more than 30 million people live below the upper-bound poverty line of about R1,634 per month. According to ISS African Futures, the percentage of South Africans living in poverty has hovered at about 62% in recent years. On the current growth trajectory, it is likely to inch down marginally to 60% over the next decade. The number is largely the result of escalating food, energy, water and fuel costs, driven by an economy in deep trouble, which has led to the unsustainable unemployment level of 32.9% of the population. 'It is only possible to reduce unemployment with a rapidly growing economy, and the figures showing economic growth of just 0.1% in the first quarter of 2025 fail to inspire much hope,' says Roets. 'Although 27% of people polled by Debt Rescue said they are compelled to take on part-time jobs or freelance to increase their income simply to meet the monthly needs of their families and themselves, many are simply not able to extend their working hours to accommodate earning an extra income, and taking on debt becomes the only other alternative,' says Roets. DebtBusters was able to show that compared with 2016: Today's consumers have 53% less purchasing power. Although the impact of inflation has recently subsided, average nominal incomes of incoming cohorts are now 1% lower than 2016 levels, and cumulative inflation over the nine years is 52%. There's better news for those taking home R35,000 or more. For them, nominal income has increased by 11% since 2016. Consumers in most income bands spend 25% of their disposable income, after debt repayments, to pay for water, electricity, rates and transport. For people in lower-income groups, who spend a larger portion of their income on food, food inflation has meant they have experienced 2% to 4% more inflation over the past few years. Top earners have unsustainable levels of unsecured debt. On average, unsecured debt levels are 34% higher than nine years ago, but for people taking home R35,000 or more, it has increased 90% – the highest ever. DM This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.

Repo rate cut offers no shelter from Budget 3.0 fallout for consumers
Repo rate cut offers no shelter from Budget 3.0 fallout for consumers

The Citizen

time29-05-2025

  • Business
  • The Citizen

Repo rate cut offers no shelter from Budget 3.0 fallout for consumers

Thursday's repo rate cut is unlikely to bring much relief to cash-strapped consumers, as any savings will be offset by the rising fuel levy eating into their income. Although the Reserve Bank's decision to cut the repo rate by 25 basis points on Thursday is good news for economists, it will not shield South Africans from the burden of the fuel and sin tax levies introduced by Budget 3.0. Neil Roets, CEO of Debt Rescue, warns that increased taxing of the workforce is not the answer and will put further financial strain on households, driving them to new depths of despair at a time when they are buckling under the weight of multiple unsustainable inflation-related living costs. 'The reality is that the finance minister's decision to impose new tax measures will hurt lower-income families most, as they will bear a proportionally higher burden, forcing them to make impossible lifestyle choices with the little disposable income they have left.' Before the South African Reserve Bank (Sarb) governor, Lesetja Kganyago, announced the repo rate cut this afternoon, economists polled by Reuters accurately predicted that the Bank would restart its repo rate cutting cycle this month, trimming the repo rate by 25 basis points to bring down the interest rate to 7.25% as the latest inflation data strengthens the case for monetary easing. ALSO READ: Reserve Bank cuts repo rate thanks to lower inflation, stronger rand Repo rate cut too small to matter for consumers 'While any cut in the repo rate benefits consumers, the change is simply not big enough to make any real difference in their lives, or to encourage growth in the economy. The impact on consumers will be minimal, as the 25 basis points cut will mean a tiny saving of R254 per month on a R1.5 million home loan and around R65 on a R500 000 car loan. 'Ultimately, a growing economy is the only solution that will slowly lift the weight of unsustainably high living costs from the shoulders of South Africans,' Roets says. Inflation currently remains outside the Sarb's target range of 3% to 6%, with the most recent data showing that consumer inflation was 2.8% in April, just slightly above March's 2.7%. However, Roets points out, inflation on food and non-alcoholic beverages was 4.0%, the highest it has been since September 2024. 'Overall, inflation is still considered low, which would have been a strong incentive to cut the current repo rate. The exchange rate of the rand also remains a key factor in economic stability and would have influenced the MPC's decision.' ALSO READ: Reserve Bank could cut repo rate on Thursday, but will it decide to? Move to lower inflation target will affect repo rate Kganyago is a longstanding advocate of shifting to a lower inflation target, arguing this would ensure South Africa is better placed to compete with its trading partners. He said earlier that a single-point target of 3% would be in line with South Africa's peers and lead to lower interest rates in the long term. However, his critics worry that reaching a lower inflation target will require tighter monetary policy that will impede growth and employment in a country with one of the highest jobless and poverty rates in the world. On Thursday, Kganyago reiterated his view, saying that the Monetary Policy Committee (MPC) believes that the 3% scenario is more attractive than the 4.5% baseline and would like to see inflation expectations move lower, towards the bottom end of their target range. He also said the MPC will consider scenarios with a 3% objective at future meetings. However, Annabel Bishop, chief economist at Investec, warns that a lower inflation target risks scuppering further interest rate cuts this year too. 'With a change to the inflation target reportedly occurring soon this year, the Sarb has chosen to cut interest rates this month to avoid the limitation of doing so in the future but then could easily be at risk of needing to reverse the cut.' ALSO READ: Salaries decreased by 2% in April, but higher than a year ago Slow pace of repo rate cuts perpetuates debt trap Roets says the reality is that the slow pace of the country's repo rate reductions is perpetuating the debt trap that millions of ordinary South Africans find themselves in, leaving millions with no option but to survive on credit. 'This scenario has been escalating since the prolonged tightening cycle began towards the end of 2021, when the MPC raised the repo rate by a cumulative 4.75% between November 2021 and May 2023, taking it from 3.50% to 8.25%, the highest level since 2014. ' Against this backdrop, the latest Statistics SA General Household Survey, released on Tuesday this week, reveals shocking statistics about hunger in the country. According to the survey results, almost a quarter of South African households did not have enough food to eat last year. This means that around 14 million people out of South Africa's population of 63 million went hungry. Of those polled, 22.2% of households considered access to food inadequate or severely inadequate. 'South Africans need real financial relief. This is a glaring red flag that should be at the top of the list of concerns for government. Sadly, this means more and more South Africans are relying on their credit and store cards to put food on the table and keep the lights on. 'The likelihood is that they will default on debt and fall into an even deeper trap, as the cost of credit increases due to existing debt. This is most evident with big purchases like home and car loans.'

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