CONSUMER FINANCIAL VULNERABILITY INDEX: Q3 2022
Load shedding and political issues affect consumer finances negatively
The report containing the results of the Momentum-Unisa Consumer Financial Vulnerability Index for the third quarter of 2022 (Q3 2022) has been released. The overall state of South African consumers’ finances improved slightly in the third quarter of 2022 but remained under pressure. The Momentum-Unisa Consumer Financial Vulnerability Index (CFVI) increased from 48.9 points in Q2 2022 to a still sub-par 49.7 points in Q3 2022.
Although the CFVI and its subcomponents predominantly moved sideways in Q3 2022 it improved on the margin in all four subcomponents. The income and expenditure indices increased, both falling in the mildly exposed category (above 50 index points). The saving- and debt servicing indices remained below 50 points, implying consumers are very exposed in terms of these sub-components. Debt servicing remained to be consumers ‘Achilles heel’. Rising consumer price inflation and interest rates, considerably reduced consumers ability to repay debt and save.
Financial vulnerability continued to negatively impact consumers’ behaviour, particularly on two fronts. There was a further increase in the already high number of consumers whose dire financial situation is affecting their relationships with family, friends, and colleagues. And more consumers are focusing so much on their financial problems which causes them to neglect other important issues.
Economic and consumer finance outlook
Key informants are not very optimistic about the economic outlook for Q4 2022. Majority expect a deterioration in both the global and local economic environments paired with continued increases in inflation and a high unemployment rate. Specifically the following majority views were expressed:
- The overwhelming majority of key informants (72.5%) expect consumer price inflation to still increase at a rapid pace in Q4 2022.
- The global and South African economies are also expected to get worse in Q4 2022.
- Some 51.0% anticipate that the level of unemployment will increase in Q4 2022, while an additional 32.4% expect that it will remain at the current high levels.
- 5% of key informants are of the view that it will take an additional 2 years for consumer finances to recover from the impact of COVID-19 and the lockdown.
- 5% expect consumer finances to deteriorate during Q4 2022.
Increasing food prices, load shedding, high fuel prices and political instability and corruption posed the highest risk to consumer finances in Q3 2022 according to the key informants who deal with consumers daily. The key informants expect the risk factors to continue in Q4 2022, but in a different order. Load shedding is expected to be the highest risk factor, followed by political instability and corruption, and high food and fuel prices. The fastest climbing risk factor, though, is seen to be politicians not focusing on consumer needs. In conjunction with political instability and corruption (regarded as second highest risk for Q4 2022), this indicates that political issues are becoming a growing risk to consumer finances.
Tips to improve consumer financial resilience
This year has so far been a year characterized by increasing occurrences and stages of load shedding in the country. It is expected that load shedding will remain a constraint for the foreseeable future. The report invites consumers to reflect on the following tips to make their households more load shedding friendly:
- Power surges – Unplug all your sensitive electrical appliances and electronic devices to ensure that when power returns, and there is a surge, your appliances are safe or use surge protectors for computers, televisions and fridges.
- Use gas – Gas stoves are becoming a popular choice for consumers who are building a new home or re-doing their kitchen. Alternatively opt for a camping size gas stove to cook food and boil water.
- Batteries instead of flames – Rather opt for battery-operated lights and torches than using candles that could be a fire hazard.
- Keep food safe – Ensure the temperature in the refrigerator is 4 °C and keep the refrigerator door closed as it will remain cold enough for up to four hours without power. If the freezer door is kept closed, frozen food will stay frozen for around 48 hours. Consider purchasing long-lasting items, such as unopened canned foods and sterile or UHT drinks that have a long shelf life.
- Go solar – Make use of the South African sun and opt for solar energy. Install a solar geyser, use solar lights and charge your cellphone with a solar charger.
Please click HERE to download the full report.