South Africans are becoming more financially vulnerable and although they are spending less, they are paying more due to rising interest rates, high food and fuel prices and rolling blackouts while their income remains static. Their never-ending financial vulnerability also affects their mental state and intensifies the deterioration of family life.
The index increased slightly from 49.1 points in the first quarter to 49.3 points in the second quarter and has now been below the level of 50 points for 12 out of the last 15 quarters , indicating a persistent state of financial vulnerability.Significant changes in the index during the second quarter show that the income index deteriorated from 50.9 to 49.9 points, while expenditure improved from 48.3 to 52.3 points. However, the savings vulnerability index weakened from 48.9 to 47.
As they have to channel more money towards debt servicing while becoming more income vulnerable, consumers sacrificed savings for emergencies and retirement which again negatively affects their savings vulnerability. The strongest behavioural impact of consumers’ increased financial vulnerability was a reduction in consumers’ mental bandwidth which means that they were constantly planning to make ends meet that affected productivity and other important matters negatively.
The risk factors that affected consumer finances in the second quarter were high food and fuel prices, while load-shedding continued to be the risk factor exerting the highest pressure on consumer finances, although the order changed slightly. There was less load shedding compared to the first quarter, leaving the gap for high food prices to take over as the highest risk factor.