South Africans are running out of money – here’s how many will struggle to survive a one month financial emergency

Old Mutual has published its latest savings and investment monitor, highlighting how South Africans are coping financially during the coronavirus lockdown.

The research was conducted with a special focus on how people are being affected by the economic downturn, and the financial implications of the Covid-19 pandemic.

It follows another survey out this week which showed that as many as 3 million people lost their jobs and livelihoods in the country between February and April.

President Cyril  Ramaphosa has also warned that further job losses are on the way as businesses continue to close in the fallout of the Covid-19 pandemic and resulting lockdown.

Old Mutual questioned around 1,500 respondents between 29 May – 23 June for the survey, reflecting more recent struggles faced by the population.

More than half (58%) of the surveyed households in South Africa face high or overwhelming financial stress as the Covid-19 crisis knocks savings and raises debt levels.

“Not only are absolute income levels under pressure as many take salary cuts, but demands on share of wallet are increasing as never before,” Old Mutual said.

“A third of consumers find that they are having to support more people financially than they did before the pandemic. Couple that with a constant fear of retrenchment or loss of income and no wonder stress levels have skyrocketed.

“Not unexpectedly, financial satisfaction levels are at an all-time low, and whilst many anticipate an improvement in the next 6 months, only time will tell as the pandemic unfolds.”

Buffer 

Buffer savings, already under pressure in 2019, have been further eroded with the resilience of relatively higher earners now being tested, the survey results show.

Consumers were asked to assess their available funds in the face of retrenchment or loss of income. In 2020, just under 40% of respondents said that they only have enough money to last a month or less, up from 28% in 2019.

Old Mutual noted that the position of higher earners is more resilient, but even the majority of higher earners are in a precarious position.

It added that the deterioration in the stock of buffer savings is evident across all income groups.

“As incomes are cut and constrained, or demands on the purse increase, especially as friends and family reach out for help, households are resorting to various different strategies to cope, Old Mutual said.

“These range from cost cutting, accessing new (or existing) credit lines, dipping into savings or just not paying the bills,” it said.

“The main actions taken (ranked by 2020 results) are taking advantage of rewards programs, dipping into savings, falling behind on payments (store card payments in particular) and borrowing from friends and family.

“The big increases have occurred in relation to dipping into savings and falling behind on payments generally.”

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Read: What South Africa’s lowest consumer inflation in 15 years means for interest rates