South Africans were cutting back on food and groceries to be able to keep paying for medical aid, insurance, and home security, as the cost-of-living crisis escalated.
These were some of the findings of a recent survey conducted by short-term lender Wonga with almost 4 500 South African adults over 18 years old, with incomes ranging from under R2 500 a month to over R100 000.
Alongside this, many were finding their credit card and loan repayments were spiralling, meaning that often savings or retirement planning suffered.
James Williams, Head of Marketing at Wonga, said the aim of this research was to gain more insight into the spending habits of consumers amid rising living costs and the high inflation rate. “In light of increasingly tighter budgets, households need to more regularly reassess their spending priorities, and find ways to cut back on expenditure,” Williams said.
The results have revealed how South Africans spend their take-home pay, and what their living expenses cost them. This snapshot of how individuals allocate their financial resources provides a deeper understanding of a consumers everyday finances, and more particularly, how they manage their monthly expenditure.
The majority of survey respondents (41%) earned between R10 000 and R25 000 take-home salary per month, which was comparable to Statistics South Africa’s median average salary in the country.
The findings showed similar spending patterns across all groups, apart from those earning under R2 500 a month who spend a disproportionately large amount of their salary just to put food on the table or keep a roof over their heads. This group of income earners, for example, reported spending about 80% of their income each month on bond or rent payments, versus the other income earners who spend around 24%.
South Africans prioritised their home, staying fed and healthy, and education over everything else when allocating their funds each month.
Some of the most expensive expenses that they reported spending on were rent or bond costs (24% of their income each month); medical aid (13%); food and groceries (11%) and school fees (10%).
Williams said private medical care was a luxury that many South Africans could not afford. “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 costs, were paying back personal loans, with repayments each month coming in at an average of 19% of respondents’ salaries.
Williams said for those who were paying off credit cards and loan repayments, it was worrying to see that repayments could rise to as much as 51% of their salary for those earnings R2 500 or less per month. “This points to many people falling into a spiralling debt trap, sometimes turning to unregulated lenders in desperation, just to make ends meet,” Williams explains.
With the cost-of-living increasing rapidly, South Africans were 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 ( fast-moving consumer goods) prices, and how interlinked electricity and fuel prices are on the production of food and groceries. It’s the perfect storm,” Williams said.
Respondents 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 were 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 dependants under the age of 21, with the average spend per dependent being R972, excluding school fees.
Williams said what was also concerning was that around one in 10 (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 the majority of them being in the lower income bands.”
The survey shows that over half of respondents (55%) were 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”, Williams said.
Lastly, the survey reported that 59% of respondents were not saving towards retirement, with the average retirement contribution coming in at just R1 206 per month. Even more alarming was that less than 50% in the 56- to 64-year-old age group were saving anything for their retirement years.
Wonga said when looking at those who were saving a portion of their income, the percentages became lower as people aged. “This is interesting, because the data reflects that the older income groups are earning more, so can better afford to save their money.”
Williams said the results of the survey directly reflected the negative impact that the steep rise in the cost of living and the increase in inflation has had on consumers. “That is why it is critical to look at where one’s money is going, find ways to reduce spend, and use the freed up cash to put towards savings or other cash generative endeavours.”
PERSONAL FINANCE