South Africans are cutting back on groceries to be able to keep paying for medical aid, insurance, and home security with many finding their credit card and loan repayments are ‘spiraling’, according to a recent survey published by short-term lender Wonga.
The survey, which includes almost 4 500 South Africans of eighteen years or older with incomes ranging from under R2 500 a month to over R100 000 per month, highlights that South Africans spend their take home pay and what their actual living expenses cost them.
“The aim of this research was to gain more insight into the spending habits of consumers amid rising living costs and our high inflation rate,” explains James Williams, Head of Marketing at Wonga. “In light of increasingly tighter budgets, households are needing to more regularly reassess their spending priorities and find ways to cut back on expenditure.”
The findings show similar spending patterns across all groups, apart from those earning under R2 500 per month who spend a disproportionately large amount of their salary just on food or on a bond/rent – approximately 80% of their income, versus the other income earners who spend around 24%.
South Africans prioritise their homes, staying fed and healthy, and education over everything else when allocating their funds each month. Some of the most expensive items that they reported spending on include medical aid (13%); food and groceries (11%), and school fees (10%).
“Private medical care is a luxury that many South Africans cannot afford, and this shows in the results from the survey,” says Williams. “Only 16% of the total number of respondents listed medical aid as a monthly cost but for those who do have it, it reflects as one of the top three of an individual’s largest expenditures.”
More worryingly, the second biggest cost reported, after rent or bond payments, were the repayment of personal loans with each month coming at an average of 19% of their salaries.
“For those that are paying off credit cards and loan repayments, it is worrying to see that repayments can rise to as much as 51% of their salary for those earnings R2 500 or less month. This points to many people falling into a spiraling debt trap, sometimes turning to unregulated lenders in desperation, just to make ends meet,” he explains.
With the cost-of-living increasing rapidly, South Africans are having to make changes to their spending habits. Respondents were asked to list which three expenses had increased the most recently, with the overwhelming majority (84%) listing food and groceries. This was followed by electricity prices (54%) and fuel (33%).
“This shows the impact the high inflation environment has had on FMCG prices, and how interlinked electricity and fuel prices are on the production of food and groceries. It’s the perfect storm.”
They were also asked to name what the first things are that they cut back on to save costs. Along with luxuries – clothing, home entertainment and recreational activities – many people (32%) reported that they needed to cut back on food and groceries as they tightened their belts.
There are some things that respondents also reported that they would not cut back on, with savings, insurance, medical aid, school fees and home security being seen as essentials.
The survey points to about 60% of respondents supporting dependents under the age of 21, with the average spend per dependent being R972, excluding school fees.
“What is also concerning is that around one in ten (11%) of the respondents indicated that they were spending more than they earn every month … A further 8% reported that they are spending between 90% and 100% of their income per month, with most of them being in the lower income bands.”
The survey shows that over half of respondents (55%) are unable to put away any savings each month.
“When looking at savings per income band, the lower income bands are not surprisingly far less likely to be able to save each month. This is worrying as they are also the most vulnerable in our society.”
Lastly, the survey reports that 59% of respondents are not saving towards retirement, with the average retirement contribution coming in at just R1 206 per month. Even more alarming is that less than 50% in the 56 to 64 year old age group are saving anything for their retirement years.
“When we look at those who are saving a portion of their income, the percentages become lower as people age,” he reports. “This is interesting, because the data reflects that the older income groups are earning more, so can better afford to save their money.”
“The results of our survey directly reflect the negative impact that the steep rise in the cost-of-living and the increase in inflation has had on consumers,” he concludes.
