Nobody could have predicted the turmoil the Covid-19 pandemic would cause for the financial lives of most South Africans. South African's incomes have been significantly decreased and thousands of others are facing the prospect of unemployment.
As a result, the economy is contracting. The pandemic has forced all of us to consider critical questions about our financial security.
According to a DebtBusters report from the first quarter of 2020, South Africans were under severe financial strain even before the Covid-19 outbreak and are now increasingly cashing in their long -term investments for immediate survival.
The pandemic is likely to continue to affect household finances for years to come. TransUnion recently reported that 79% of South Africans’ household income has been negatively impacted.
Therefore, being mentally strong, having a plan, prioritising spending and using resources efficiently is imperative to the financial stability for many families.
Local insurance company Metropolitan recently launched a campaign, the Three Word Story campaign, which seeks to build resilience among South Africans by sparking conversations about real-life financial concerns, and ease their anxiety about the future by finding ways to deal with the challenges they face.
The Saturday Star chatted to Llewellyn Allen of Metropolitan Insurance about the company’s new campaign. Allen also gives handy tips to help South Africans deal with the financial challenges we are all facing and how to navigate through these unchartered waters.
We also speak to a financial expert who give us his advice on how South Africans can survive this pandemic financially.
Llewelyn Allen: Head of Marketing: Metropolitan
Can you tell me a little bit about the Three Word Story campaign and what it’s all about?
Dealing with a pandemic and its impact on our families, our jobs and our finances, have caused anxiety and stress for so many South Africans both those that are willing to admit it or not. Metropolitan wanted to inspire people to acknowledge the need to build up their mental strength and then together find resilience so that we can all cope better with this new reality in a Covid-19 world.
Through the Three Word Story campaign, we invited people to speak openly about their fears and the challenges they face. It created a much-needed platform for us to share our experiences. We also involved motivators such as Malibongwe Xaba, Hector Mathebe, Keabetswe Jan, Lehlohonolo Thoabala and Abongile Mangala, who helped facilitate conversations and provided practical steps to help people deal with the specific concern.
The campaign emphasised that mental strength is essential for our well-being. It eased our anxiety about the future by helping us find ways to express ourselves and navigate new challenges. It reminded us that we already have the fortitude to handle whatever life throws at us, especially when we’re there for one another. The voices we heard during the campaign spoke to our resilience, our shared humanity, our deep connection to everyone in South Africa and the world. We needed reminding this new reality is not particular to anyone, we are all going through this together.
The campaign seeks to build resilience among South Africans by sparking conversations about real-life financial concerns. What are some of the real-life financial concerns that South Africans are going through right now due to the Covid-19 pandemic?
Many people have had to deal with losing some or all of their regular income during the pandemic. That sparked financial concerns about having enough savings to deal with it, how to restructure your finances to get you through this time, and how to deal with debt and getting rid of debt.
In general, the financial concerns are about getting through this difficult time while planning for the future. People also had to deal with the psychological stress of balancing the need to stay safe with the need to earn a living, we cannot under-estimate the far reaching anxiety that this can have on a bread-winner.
People are losing their jobs, others are getting huge salary cuts. What are some of the ways that South Africans can survive this pandemic financially?
It’s important that we are all honest with ourselves about how much money we have to start off with and how much we spend on what. Honest and realistic budgeting and keeping track of expenses serve as a great reality check. There is no need for this to be a complicated process, it simply requires a fair look at your income and expenses, particularly the small amounts that we tend to wipe off the table. It all adds up. Involve the entire family – it not only teaches kids how to work with money, but it also gets everyone to contribute to lowering household spending.
Cutting costs in many small ways can make a huge difference. Now is the time to make the right financial decisions and avoid the temptation of investing in and losing your money to get-rich-quick schemes. Speak to an accredited financial adviser if you need help with making smart financial decisions during this time.
Would you say that the pandemic is likely to continue to affect household finances for years to come?
Yes - a TransUnion report highlighted that 79% of South Africans’ household income have been negatively impacted by the pandemic. This kind of shock to anyone's finances will require some time to recover from. However I believe the longer term affect won’t be confined to our actual money alone but also to our attitude to finance. I suspect that we are going to see a change in how we approach maintaining a buffer for any uncertainties.
What are some of the ways that we as South Africans can save money during a terrible financial crisis like this?
Realistically reassess your needs and wants. Things are not as they were and unfortunately at times like this your finances and budget need to adapt accordingly, make smart financial decisions and have honest conversations with the entire family about the family’s financial situation. Then, adjust your spending so that you can get through the difficult time.
Should we as South Africans be up-skilling ourselves with other skills?
Absolutely. We should always be looking at what skills we can improve and what new skills we can acquire to either make us more employable, or help us build our own businesses. Be thoughtful in what to up-skill yourself on, a jump into a new skill isn’t always the only option, up-skilling in your field can be more advantageous sometimes.
What are some of the skills that we need to equip ourselves with and that will be beneficial to us during a crisis such as this?
This is different for different people. It depends on what career you are in, and what your talents are. I suggest that you conduct a skills audit to find out what additional skills can make you more competitive in your specific career. It will not only help you in your professional life, but will also boost your personal growth.
Skill that are occasionally overlooked and which are key to your mental resilience during a time of crisis is our emotional Intelligence and the development thereof; our interpersonal skills and communication as well as our coping under pressure strategies, these allow us to mental and collectively handle what is happening better.
Financial expert Kobus Liebenberg, Marketing Actuary: Metropolitan Life
How can one protect themselves financially during the Covid-19 pandemic?
These are tough times and it is imperative to manage your expenses and prioritise savings while the foreseeable future is still uncertain. Spending less on luxuries and other non- essentials will help, but you can also try to renegotiate your car insurance premiums while you are working from home and travelling fewer kilometres than you normally would have, for example.
If possible, you can also consider developing new skills that can bring in extra income. Insurance is also a good idea, as it provides some certainty during these uncertain times. Consider meeting with a financial planner to assess your needs and to look into funeral and life cover solutions, or to draft or update your will.
Would you say South Africans are under more financial strain than even before due to the Covid-19 pandemic?
Absolutely - not just South Africans but the whole world. The nation-wide lockdown at the end of March 2020 - although necessary - left many small businesses and individuals exposed, without any way to earn an income. The subsequent risk adjusted strategy means that economic activity in certain sectors will remain limited, which will result in reduced earnings for many individuals and businesses.
The pandemic has exposed our poor saving habits, as undisciplined savings would have resulted in fewer emergency funds to use. More financial education is imperative on how to save for rainy days or the inevitable. It is however heart-warming to see the spirit of Ubuntu thriving in our communities, where some are lending a helping hand to the less fortunate.
What are some of the biggest financial concerns South Africans have at this time?
At the top of the list is job security, salary cuts, temporary and/or permanent lay-offs. Individuals will also find it difficult to repay high-interest debt while they are unable to earn a full income.
Further to this, the extent to which individuals’ retirement savings were affected depends on the investment portfolio underlying their savings. While some asset class values reduced (shares, for example) others remained relatively stable.
Just how badly has the Covid-19 pandemic affected South Africa’s economy?
The economy was already on its knees and the pandemic has affected it more negatively. The Johannesburg Stock Exchange (JSE) sunk to levels last seen at the end of 2012, completely overshadowing the impacts of the 2008 financial crisis. At the time of writing, the economy has started responding positively to various supportive measures put in place, both internationally and locally, to assist with the rebuilding of the economy.
While many economists considered it inevitable, Covid-19 could have been the final nail in the coffin which resulted in credit rating agencies downgrading South Africa’s international long- term credit rating to sub investment grade, more commonly known as junk status.
This makes it more difficult for South Africa to attract foreign investments which can be used to improve our beautiful country. South Africa’s GDP will also be much lower than what was expected for the year while certain sectors remain closed, and tax revenue prospects for the government will also be affected negatively due to working class pay-cuts and job losses, as well as reduced tax revenue from alcoholic beverage and tobacco product sales.
Which industries have been most hit by the Covid-19 pandemic?
Alcohol tobacco
Restaurants
Health and beauty
Tourism, including hotels and guest houses
Financial services
The above are big industries that contribute substantially to the economy.
What financial advice can you give to all South Africans who are struggling financially right now?
Reassess your finances and budget accordingly:
Honest budgeting and keeping track of expenses serves as a great reality check. Be honest with yourself; the first step is to understand where and how you spend your money. To do this properly, draw up a detailed, accurate account of everything your households spend money in a normal month.
Start by listing all fixed monthly expenses that help you maintain a basic standard of living, then draw up a second list of variable expenses, including discretionary spending. Once you have both lists,compare them with your income and cut out any unnecessary items so that your expenses are less than your income.
Involve the whole family:
This is an opportune time for parents to talk to their children about where money comes from, why budgeting is so important, and how everyone in the family can contribute to lowering household spending by making compromises. Parents may want to consider reducing their children’s allowances now that most children are at home and not able to spend money on excursions.
Set savings targets for the whole family and make it fun and practical. Seeing money accumulate in a glass jar in the kitchen and later depositing it into a bank account for safety can be highly motivating, and it can be the start of learning about investments and earning interest
Make smart financial decisions:
A crisis such as the Covid-19 presents new opportunities for scammers and fraudsters to steal money by preying on people’s anxieties. Now is the time to make considered financial decisions and avoid the temptation of investing in and losing your money to get-rich-quick schemes. Speak to an accredited financial adviser if you need help with making smart financial decisions during this time.