Insights from the 2023 Q4 Credit Stress Report

Johannesburg - South African consumers don't have it easy at the moment. With less disposable income in their pockets due to inflation, high fuel prices and increased interest rates, finding the money to survive month to month, let alone spend on luxuries, is no easy task. But, there is some light at the end of the tunnel.

Finance Minister Enoch Godongwana recently delivered the 2024 Budget Speech, unveiling a mix of news impacting consumers across South Africa. Among the announcements, he revealed that there would be no inflationary adjustments to personal income tax brackets, tax thresholds, tax rebates, or medical aid credits. However, above-inflation adjustments were made to excise duties on alcohol and tobacco products. Additionally, there were no changes to the general fuel levy and the Road Accident Fund levy, painting a complex economic picture for consumers to navigate.

The 2023 Q3 Credit Stress Report showcased some positive economic and credit developments in South Africa for the first time in several years. However, the latest 2023 Q4 Credit Stress Report exhibited a mixed set of indicators, with the unemployment rate marginally increasing, inflation rising, and consumer confidence dipping again. In the credit space, the percentage of loans in arrears decreased by another full-percentage point.

Key findings from the report include:

• Consumer inflation saw a slight increase in the average quarterly headline, rising from 5.0% to 5.5% in Q3. This uptick was propelled by rises in various categories, notably food & non-alcoholic beverages and housing & utilities.
• The overdue balance on all loans decreased by almost R1bn (-0.5%) quarter-over-quarter, with a significant decrease in Vehicle Asset Finance (VAF) overdue balances.
• The number of loans in arrears continued to decrease, showing a trend towards lower percentages of loans in arrears, nearing the lowest recorded percentage since Q3 2018.
• The retail sales index experienced a marginal decline of -1% quarter-over-quarter despite the festive season shopping events, attributed to high interest rates and weak consumer confidence.

Amidst these economic dynamics, consumers are reminded of the fundamental role that a well-structured monthly budget can play in securing their financial well-being and not getting into too much debt. The report serves as a timely cue for South Africans to prioritise financial stability and make informed decisions about spending habits. 

By staying informed and adhering to sound financial principles, consumers can capitalise on the improvements outlined in the report and position themselves to successfully negotiate the current economic environment.

Strategic Budgeting Tips for South African Consumers:

• Track your expenses: Monitor income and expenses meticulously to curb unnecessary spending.
• Ensure you have savings and investments: Allocate a portion of salaries towards savings, investments and long-term financial goals to foster financial security.
• Have an emergency fund: Set aside funds for emergencies to establish a robust financial safety net.
• Set aside funds for entertainment: Consider budgeting for entertainment to strike a balance between financial responsibility and enjoyment.

Jennifer Barkhuizen, Head of Marketing at Mettus, says budgeting can seem daunting, but it can be manageable with the right approach. She advises breaking it down into manageable steps and tracking expenses diligently to make informed decisions aligned with financial goals.

"Budgeting is not a one-size-fits-all approach," Barkhuizen emphasises. "It should be tailored to each household's specific circumstances and continuously reassessed to adapt to evolving needs."

As a leading credit information bureau, XDS reaffirms its commitment to empowering consumers with the tools and insights needed to make informed financial decisions amidst the evolving economic landscape.