South Africans are buying in bulk, scrimping on luxuries and joining savings schemes in abid to make ends meet.
The economic decline has seen a surge in membership of stokvels, grocery schemes and burial societies as black South Africans scramble to find creative ways to make ends meet.
The Savings and Investment Monitor, an annual survey commissioned by Old Mutual and conducted by independent research house Peppercorn Research between April 25 and May 24, has found that people are cutting back on luxuries and on entertaining friends at home – and that nearly half of adult children between the ages of 18 and 35 still live at home with their parents.
In addition, the study found that the black middle class was failing to save for their children’s education because black tax – the financial responsibility which falls on black professionals to provide for their extended family – hit their pockets hard.
Face-to-face interviews were conducted with 1 000 households of all races in Johannesburg, Pretoria, Bloemfontein, Durban, Cape Town, Port Elizabeth and East London.
The study was monitored by National Treasury, the SA Reserve Bank, the Financial Services Board and the SA Savings Institute.
Julie Hutchins, spokesperson for Old Mutual, said consumers were affected by the negative political, social and economic environment prevailing in the country. Corruption, crime and unemployment were top of mind.
Other issues worrying South Africans were political strife, inflation, the country’s downgrade to so-called “junk” status, drugs, fraud and racism.
“South Africans are cash-strapped and financially stressed because of the current turbulent economic climate with its interest rates, taxes, the rising cost of living – with salaries remaining unchanged – and increasing unemployment.
“Having no income results in being unable to save,” Hutchins said.
When Finance Minister Malusi Gigaba delivered his mini budget speech in Parliament, he painted a bleak picture of the economy, saying it could lead to further downgrades and increased unemployment, which remains at high 27.7%.
Some of the people polled in the Old Mutual survey said they chose to borrow from stokvels to pay for their children’s school and university fees. Others, such as Fikile Dube, prayed for a good Samaritan or for government intervention.
Dube (42), who lives in Vosloorus, Gauteng, is raising her two children, as well as her sister’s two, on a salary of R4 400 a month. She works as a cleaner at a steel products factory in Boksburg East. She also has to take care of her parents and assist her extended family whenever she can. She said she was forced to join a grocery stokvel, through which members buy in bulk from warehouses and retailers in December to have enough festive food for Christmas.
She also joined a community burial society scheme in case anyone passed away, “to take care of funeral requirements and food”.
“I was also forced to rent out two rooms at the back of my family’s four-roomed house for R500 each. At least that makes a slight difference,” she said.
Dube said she was particularly worried this year because there was no money to save for her daughter Xoliswa’s university fees.
Xoliswa is currently writing her matric exams.
“I hope I can get a bursary for her. I am supporting her to pass Grade 12. I want her to be educated. I never got that chance,” she said.
Dube is one of thousands who have resorted to other means to cushion their families against poverty.
The study also found that South Africans were:
- Increasingly buying groceries in bulk, looking for discounts and changing to cheaper brands;
- Cutting back on luxuries such as travel, holidays, entertaining at home, eating out, visiting beauty salons and hiring domestic workers and gardeners;
- Taking on second jobs to make ends meet;
- Increasingly investing in stokvels, with participation by black families rising from 49% in 2010 to 53% this year; and
- Moving their children to more affordable schools – “sometimes to the detriment of the quality of education their children will receive”, Hutchins said.
The Old Mutual survey also found that:
- Nearly half (49%) of young people between the ages of 18 and 34 live at home with their parents, compared with 45% in 2013; and
- At least 88% of black people participate in informal savings schemes such as stokvels, burial societies, grocery schemes and unbanked money. Stokvel payments were often used to pay off debts, to save for an emergency or for education, and to buy groceries, furniture appliances and clothes.
About half of black households borrowed money from a stokvel, at an average amount of R4 660, at least once last year to pay school fees (32%), pay off debt (24%) and buy groceries (23%).
Hutchins said although more black respondents were involved in stokvels than other races, “this does not mean that whites, coloureds and Indians are not participating in stokvels”.
The sandwich generation
Hutchins said the study found that wage earners were not only caring for their children, but increasingly for ageing parents too.
This so-called sandwich generation increased to 58% of wage earners this year, compared with 50% in 2012.
Of those earning less than R6 000 a month, more than a quarter (26%) reported that they were expected to support their parents and children this year, compared with 21% in 2013.
And, of those earning more than R40 000 a month, one in five (21%) said they supported parents and children, compared with 16% in 2013.
There has also been a decline in borrowing from banks, micro lenders, friends and relatives this year.
Hutchins said a continuous message that had emanated from this research since 2008 was that South Africans wanted to be better savers. More than 80% of the working metropolitan population surveyed attested to this annually, saying they wanted to manage their finances better but didn’t know how to do so.
“One factor is the misguided belief that one can only seek expert financial advice from advisers or financial planners if one is wealthy. This is not the case,” said Hutchins.
Some of the survey’s more positive findings were that working people had become more frugal, cutting down on luxuries, buying cheaper goods and, most importantly, increasingly realising the importance of paying off debt or avoiding it altogether.
“This is also potentially based on the necessity for survival, but is still a positive,” Hutchins said.
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