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FIFI PETERS: A third of South Africans with home loans are struggling to meet their monthly repayments or are even falling behind on those payments.
That is according to the latest Old Mutual Savings and Investment Monitor which was released today. The report also showed that around one in two – 50% – of those surveyed are worried about losing their jobs.
So to give us a broader picture of how South Africans are dealing with the cost-of-living crisis right now, and the impact it’s having on their ability to save and even invest, I’m joined by John Manyike, the head of financial education at Old Mutual Mass and Foundation Cluster.
John, good to talk to you again. What I want to say is that South Africans are often described as resilient. We are resilient in the face of everything. We are resilient through a pandemic, and more recently through a tornado and an earthquake. We are resilient through a fragile economy.
But it looks like the latest report on savings and investments is starting to show some cracks in how resilient we can be throughout everything we’ve experienced, particularly when it comes to our finances. Just take us through the key highlights of this year’s survey.
JOHN MANYIKE: Absolutely. I think kudos to South Africans for their resilience by way of being creative in how they stretch their budgets. And I think if anybody is looking for ways to cope during tough economic conditions, you have to speak to a South African.
But when you look at the stats, about 70% of South Africans are saying they are either earning the same as they were earning three years ago – or less.
So basically it means that incomes are not improving as much as one would have loved them to.
FIFI PETERS: In fact, they’re getting poorer if you take into account inflation.
JOHN MANYIKE: Absolutely. If you take into account the inflationary pressures with the interest rate hikes that we’ve seen, certainly it means the net effect is negative.
Basically people are poorer. But if you really look at how South Africans have been coping – about 70% of South Africans are using loyalty and reward points to supplement their income.
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We are saying about 40% [of people] are switching to cheaper TV streaming options, and about 36% are switching to cheaper supermarkets.
The third [thing] for me is about 33% are cutting down on domestic help.
So the DIY approach is coming through there, which means from an employment point of view that’s a bit of a dent in our employment numbers if you consider that, because people are saying, ‘We simply cannot cope’.
FIFI PETERS: Do you know what also stood out? It’s that people are stressed. There’s a whole lot of stress and there’s a whole lot of anxiety right now about the economy, about financial matters. I was hoping that you could just speak to that a little bit more, about how the anxiety around one’s job and the economy is filtering into not only financial stress but also mental health.
JOHN MANYIKE: Absolutely. At the moment it’s quite a tough one, especially if you consider the fact that the confidence level in our economy is at its lowest; I think about 27% of people have serious concerns about the economy, given all those challenges. But again, when you ask South Africans what their top financial priorities are you see that job security certainly tops the charts there.
Of course people are stressed about the way things are going, and they just have to find other ways to survive.
We will really have to consider the mental health issue and how it impacts people who are struggling to cope. We are seeing a lot more people borrowing money from friends and family members. When somebody starts doing that you know that the situation is quite dire. Those are some of the mental health issues that one needs to take into account.
FIFI PETERS: I know that the survey has some interesting insights on stokvels, another vehicle that many South Africans have used to save. What stood out last year was that there was an increase in contributions towards stokvels, the monthly contributions. I see that this year the monthly contributions towards stokvels have actually come down. From R1 384 per month on average last year it’s come down to R1 350. Do you reckon that’s a function of the economy?
JOHN MANYIKE: Absolutely, without a doubt. People’s disposable income is under pressure.
And if you consider food inflation, that was a serious challenge for many South Africans. You can imagine that people could only contribute less than they used to.
But also what I found to be quite interesting was that there were a lot more people borrowing money from the stokvels themselves, as opposed to increasing their contributions. So it’s almost like saying: ‘Look, I’ve been loyal to the stokvel and now I’m in trouble. I think it’s about time you lend me some money to help cope with all these challenges.’
FIFI PETERS: The people who unfortunately have not been able to retain their jobs in this economy – what kind of behaviour have you witnessed in terms of how they have used either their pension or their provident savings?
JOHN MANYIKE: I think what is clear here is that people are certainly dipping into their savings, and we are seeing some of those people borrowing from their savings clubs or stokvels. But we also noticed that the number of people who are actually borrowing in order to pay other debts is increasing. So there’s certainly a lot of pressure on South Africans.
FIFI PETERS: Sure. John, you are known for giving South Africans financial education tips.
And as you have spelled out, the main findings and the highlights of the survey are that it is pretty tough right now and I think that [will resonate with] a lot of people who are listening. They are living in this economy. They’re experiencing the fact that their incomes haven’t grown significantly in the past three years and that the prices of everything else that they pay for have grown more than significantly.
So against this backdrop perhaps you could leave us with your thinking on how South Africans can cope better in this environment – beyond what they’re already doing. You spoke about the loyalty points and downgrading on streaming options and that some are giving up their gym subscriptions and all of that. But just beyond what they’re already doing, are there any additional things that you could share that you think could be useful for them?
JOHN MANYIKE: Absolutely. I think this means tighter expense management. It means you need to have a budget, stick to it, and do your best to live within your means.
But also something quite important is really exploring alternative streams of income. We’re seeing that many younger people have a second income.
So the days of relying on a single income, to be honest, are over – so you have to find alternative streams of income because that creates room for you to pay your debt faster. It also creates room for you to put money aside for emergencies or for rainy days.
FIFI PETERS: But I suppose the caveat will be ‘provided that it’s okay with your current employer’.
JOHN MANYIKE: Absolutely. You need to take care of your main job. Don’t compromise your main job as you look for alternative streams of income.
FIFI PETERS: John, thanks so much for that. We’ll leave it there.
John Manyike is the head of financial education at the Old Mutual Mass and Foundation Cluster.
