Research conducted by TransUnion just before the third wave of Covid-19 and recent civil unrest shows that nearly two-thirds of South African consumers (61%) said their household income continued to be negatively impacted by the pandemic.

This number is similar to March 2021 (62%), but significantly lower than the all-time high of 84% a year ago.

TransUnion’s ongoing Consumer Pulse (formerly Financial Hardship) study[1] shows that nearly nine out of 10 (88%) impacted consumers remained ‘highly concerned’ about their ability to pay their bills and loans at the time of the most recent research at the beginning of June.

Credit obligations were the top concern, with mashonisa loans (44%), personal loans (37%) and retail accounts and credit cards (30%) at highest risk of going unpaid among those who have those bills and loans. In all, 43% of consumers surveyed reported being in arrears for a bill or loan in the past three months.

“While there have been clear signs of recovery in South Africa’s economy and the overall state of consumer finances, the fact is that many consumers are still under severe financial pressure. It also remains to be seen what effects the third wave lockdowns and recent civil unrest will have on the consumer wallet,” says TransUnion South Africa’s head of financial services, Andries Zietsman.

The main reasons for lower household incomes were job losses, salary cuts and reduced work hours. Four in 10 (40%) surveyed consumers said someone in their household had lost their job, 38% said someone in their household had their salary reduced, and 28% reported lower work hours in the past month.

South Africa’s youngest consumers appear to be the least impacted by the pandemic. Almost half (49%) of Gen Z (born after 1995) consumers said their household income was currently decreased, compared to 67% of Millennials (born between 1980 and 1994), 65% of Gen X (1965-1979) and 67% of Baby Boomers (1944-1964).

Only 4% of surveyed households said their finances had fully recovered after having their household income decrease at some point during the pandemic, with just under half (48%) of those impacted reporting that they had not recovered. However, South Africans remained upbeat: 75% of all surveyed said they were optimistic about the future, with 52% confident their household finances will fully recover in the next 12 months. To speed this recovery, 18% had started doing gig work, 17% had started a small business, and 17% had begun selling goods informally.

Opportunities for credit growth

Consumers have a clear appetite for credit, with 85% of households considering access to credit extremely, very or moderately important, but only 27% believed they currently had sufficient access to credit. A third (33%) planned to apply for new credit or refinance existing credit within the next year, with a new personal loan (39%), credit card (33%), and mortgage, home loan or bond payment (30%) at the top of the list.

Channels of preference when acquiring new credit include in-person at a branch (33%), online via a computer (19%) and online via a website on a mobile phone (18%).

Forty-five percent of surveyed consumers considered applying for new credit or refinancing existing credit but ultimately decided not to. Just over a third (34%) believed their application would be rejected due to their income/employment status; 30% felt the cost of new credit or refinancing was too high; and 26% thought they’d be rejected due to their credit history.

Fraud remains an issue

Around two in five consumers (41%) reported that they are personally aware of a Covid-19-related digital fraud attempt targeting them in the last three months, with 7% having fallen victim.

The top Covid-19 related digital scam was fake insurance, followed by unemployment and third-party seller scams. Among those who said they were hit by Covid-19-related digital fraud in the last three months, 27% said they were targeted with an insurance scam, up 11 percentage points from Q1 2021.

Zietsman says consumers should keep tabs on their credit reports, both to stay on top of their financial health and to guard against fraud.