The word recession is enough to make anyone shake their head in shame. Consumers are often not sure what the cause is and how exactly a recession can be avoided. Is it the fault of government, the big corporates, overseas influence? Probably a combination thereof, but one thing is for sure, that it often results in a bit of panic for the consumers.
Over the past few months, price hikes have hit South Africans hard. Desperate times have caused many to watch their spending and hope that they have enough to make it through the month. As reported by IOL, a report by The Conference Board® Global Consumer Confidence, in collaboration with Nielsen, came out with some interesting results.
Consumer Confidence Has Dropped Due To Price Increases
Nielsen Sub-Saharan Africa managing director, Bryan Sun said,
Consumer confidence in South Africa dropped in Quarter 2, 2018 after the initial recovery seen at the beginning of the year. Inflationary pressures due to rising petrol prices, VAT increasing to 15 percent and the sugar tax have all contributed to a more constrained environment and have dampened consumer spend. The initial optimism felt at the beginning of the year has subsided and consumers have again become cautious.
Consumers Have Changed Their Spending Habits
A whopping 84 percent of South Africans have changed their spending habits in the recent quarter. Consumers scramble to stick to a budget and make sure that their money makes it through the month. By cutting down on luxuries and other expenses, South Africans are taking positive steps.
According to the research report, here are the biggest changes:
- Cutting down on takeaway meals (65 percent)
- Spending less on new clothes (59 percent)
- Switching to cheaper grocery brands (55 percent)
- Out of home entertainment (54 percent)
- Reducing expenditure on gas and electricity (50 percent)
Paying Off Debt Is A High Priority
35 percent of South Africans say that they would use spare cash to pay off debt, credit cards and loans. With a large number of South Africans sitting in an over-indebted position each month, we hope this is the case. According to a World Bank Report, over 10 million credit-active consumers are in arrears on one or more accounts.
Although the sentiment above is fantastic, the reality is that not many consumer have any spare cash at month end. Debts pile up and often before any living expenses have been considered, there is little to no money left in the account. In severe cases, monthly debt repayments take up 75% or more of consumers’ net salaries.
If you have lots of debt and are struggling to make payments to all credit providers, you may be over-indebted. Vantage Debt Management is able to decrease monthly debt repayments by up to 60% in many cases. For a free financial assessment, complete a callback form to get call from one of our experts today.