Nearly half of South African consumers (44%) say they will not be able to pay at least one of their current bills and loans in the next three months, according to research conducted by TransUnion in late May and early June.

And, with high inflation rates and forecasted continued interest rate hikes on the horizon, the study also found the majority (52%) of households said they will cut back on their discretionary spending.

The cuts in discretionary spending come despite just under a third of respondents (31%) to TransUnion’s quarterly Consumer Pulse study reporting their household income improved in the last three months, an increase of five percentage points from the prior quarter. In all, 26% of respondents said their household income decreased in the last three months.

The improvement in household income was largely due to South Africa’s unemployment statistics dropping from a record-high of 35,3% to 34,5%, saiys Lee Naik, CEO of TransUnion Africa.

“At the start of Q2, the South African annual inflation rate was at 5,9%, consistent with levels observed in prior months and aligned with market forecasts. However, this is the 12th consecutive month where annual inflation has been at the higher end of the median of the South African Reserve Bank’s (SARB) target range of 3% to 6% at 6,5%. For South African consumers, the combination of ongoing rate hikes means higher monthly repayments on their debt obligations, on top of sharply increased food and fuel prices,” says Naik.

While most consumers (93%) in the survey said they believe access to credit and lending products is important to achieve their financial goals, less than half (42%) reported they had sufficient access to credit.

In all, 40% of consumers are planning to apply for new or refinance existing credit. This aligns with the findings of TransUnion’s quarterly Industry Insights Report, which measures consumer credit trends found in TransUnion’s database. That report found that credit card originations increased 27.6% in Q1 2022 from the same period in 2021.

Personal loan originations were up 8,5% year-on-year, although still lower than pre-pandemic levels.

In the Consumer Pulse study, more than half (51%) of consumers said they had considered applying for credit or refinance existing credit, but decided not to. The reasons for abandoning their applications for credit were high costs (32%), an alternative funding source (27%), or a belief that their application would be rejected due to their income or employment status (25%).

Most consumers said monitoring credit is at least moderately important (89%), with six in 10 (62%) saying they monitor their credit at least once a month. Most (53%) believe their credit scores would increase if businesses used alternative credit information in addition to standard metrics.

“It’s critical that consumers keep tabs on their credit report to stay on top of their financial during these challenging economic times,” says Naik.