SA consumers felt less vulnerable late in 2016 - index

Cape Town - South African consumers felt financially less vulnerable in the fourth quarter of 2016 as shown in the latest MMI Unisa Consumer Financial Vulnerability Index (CFVI).

Shelley van der Westhuizen of MMI Corporate and Public Sector, cautioned that South Africans are still deeply worried about their finances.

“Debt stress remains unsustainably high across the board and, even after the improvement we have seen, consumers are still feeling vulnerable. But, given the track record of the CFVI as an accurate indicator of economic growth, it is reasonable to believe that this might translate into improved economic performance, resulting in the start of a virtuous circle,” said Van der Westhuizen.

The index moved up to 52.71 for the fourth quarter of 2016, which represented a marginal improvement from the previous quarter - 52.07 in the third quarter of 2016 - and a more marked one year-on-year - 50.95 in the fourth quarter of 2015.
 
The CFVI has measured South African consumer perceptions of their savings, income, debt servicing and expenditure since 2012 and, according to MMI, has proven to be a consistent leading indicator of economic growth.

The overall index for the quarter was the highest since the first quarter of 2015 and the second highest in more than four years.

The fourth quarter of 2016 was also the very first time since 2012 that not one of the four sub-indices measured by the CFVI was in the Very Exposed band. The debt servicing component has been languishing in this band since the first quarter of 2014.

The main reasons for consumer financial vulnerability levels in the fourth quarter of 2016, provided by respondents to the survey, remained consistent with those expressed in the previous quarter. It included consumers spending more than what they earn, too much existing debt, bad financial planning, and not having sufficient savings to draw on.

According to the index report, this demonstrates a low level of financial capability among consumers in South Africa. Although consumers might know how to plan, not to incur excessive debts and to save, their behaviour and/or circumstances are contradictory to their knowledge. As a result, there exists a fundamental need for change in consumer behaviour to ensure more positive financial capability outcomes, especially in a volatile and uncertain macro-economic environment.

"It appears that debt has become a more important predictor of financial vulnerability as consumers find themselves in a type of survival scenario where as long as a person has access to debt, it forms an important additional source of income to cover their expenditure, and hence obtain a certain level of satisfaction regarding their financial situation," the index report states.

"This may explain the reason behind an increasing need among consumers to supplement their main source of income by incurring debt, or alternatively, becoming more reliant on social grants."

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