By Nico Strydom
The Covid-19 pandemic is still having a negative effect on the domestic income of South Africans, with consumers who are becoming increasingly concerned about their ability to pay their accounts.
Research by TransUnion just before the start of the third Covid-19 wave and the riots in Gauteng and KwaZulu-Natal pointed out that consumers were especially concerned about their ability to pay their debts, especially personal loans, retail accounts and credit cards. 43% of respondents indicated that they fell into arrears with an account or loan over the past three months.
The main reasons for lower domestic income were job losses, salary cuts and reduced hours of work. Four out of 10 (40%) of consumers who were questioned said that somebody in their household lost their job, 38% said that their domestic salary was cut, and 28% said reported fewer hours of work.
It would seem that younger consumers were least affected by the pandemic. Almost half (49%) of Generation Z respondents (those born after 1995) indicated that their domestic income decreased, compared with 67% of Millennials (born between 1980 and 1994), 65% of Generation X (1965–1979) and 67% of baby boomers (1944–1964).
Only 4% of the households questioned said that their finances had fully recovered after their domestic income had decreased at some stage during the pandemic. However, South Africans stayed optimistic: 75% of everybody questioned said that they were optimistic about the future and 52% were confident that their domestic finances would fully recover within the next 12 months. To speed up this recovery, many of the respondents have begun to do extra work.
So-called paid holidays and successive lowering of interest rates brought much-needed temporary relief but consumers’ spending patterns are again starting to adapt while lenders want their money back, says Benay Sager head of DebtBusters.
However, Sager warns that those who were lucky enough to keep their jobs or income cannot now simply sit back and relax. “Even though it seems as if things are getting back to normal, it is still a very difficult and uncertain environment. Consumers should focus on what they can control so that they can put themselves in a better position to face setbacks as the economy is beginning to recover.”
According to Sager it is important to determine your financial position, to set attainable goals and not to postpone. Determining your financial position will give you perspective regarding your money affairs and what you should do to rectify them, such as decreasing certain expenses or paying off high-interest-rate debts. Attainable financial goals include, inter alia, having an emergency fund for contingencies. It is important to assess your financial position as soon as possible to make sure that you don’t end up again in a situation where you can no longer meet your financial commitments or even lose your assets.