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STATE OF CONSUMER FINANCES DROP TO THEIR MOST VULNERABLE LEVEL EVER

STATE OF CONSUMER FINANCES DROP TO THEIR MOST VULNERABLE LEVEL EVER

THE INITIAL CONSEQUENCES OF COVID-19 AND SUBSEQUENT LOCKDOWN

The Momentum/Unisa Consumer Financial Vulnerability Index (CFVI) has declined to its lowest level ever, of 35.4 points, during the second quarter of 2020 (Q2 2020). The decline of 11.8 points from 47.2 in Q1 2020 is also the largest ever quarterly decrease measured since the inception of the index in Q2 2009. This reading, which indicates that consumer finances are in a “Very Vulnerable state”, is a direct consequence of Covid-19 and the subsequent lockdown instituted by the South African government.

This severe state of financial vulnerability appeared to have behavioural effects – the results revealed that consumers appear to be more focused on their finances and less on staying safe against the Covid-19 virus. Literature has similarly revealed that financial vulnerability can be associated with social consequences, such as an increase in criminal activity and substance abuse. All four sub-components of the CFVI declined to the Very Vulnerable state, which means that consumers, in general, are so vulnerable that they are unable to cope.

The recovery in consumer finances, following the effects of the pandemic and lockdown, will most likely be slow, an opinion confirmed by 53.6% of key informants that recovery is more likely to take longer than two years.

The main interventions or changes that key informants suggest for consumers to recover financially from this pandemic include:

  • An improvement in the local economy to stimulate job creation.
  • Entrepreneurship and complimentary income streams.
  • Financial discipline and financial literacy.
  • Restructure expenditures to focus on needs.
  • Government support (for businesses and individuals).
  • Repay outstanding debts.
  • Increase savings, despite difficulties in doing so.

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