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The financial gap between South Africa’s economic classes is widening, with middle-income to affluent consumers in a stronger financial position compared with last year, while lower-income households face rising financial stress, debt reliance and insecurity.
While many people demonstrate strong intent to save, the drawdown of savings and a reliance on informal, shorter-term savings vehicles indicate that consumers are battling to effectively manage their finances, according to the annual Old Mutual savings and investment monitor published on Tuesday.
“Current realities reveal that many working South Africans remain financially fragile. Challenges with debt, expense control, savings preservation and long-term financial preparedness suggest there is a clear gap between intention and meaningful action,” the report states.
“While rising incomes are contributing toward a more positive outlook, financial stress has turned upwards again, especially among lower-income households who are facing growing debt pressures and rising financial tensions. We see a widening gap among working South Africans, with higher-income households improving, as lower-income households face growing financial strain.”
The report follows a separate study last week by PayInc, which shows rising inflation is eroding South African salaries, with real take-home pay in June falling to the lowest level in about two years.
Inflation has been rising since March, reaching an annual rate of 5% in June from 4.5% in May, according to the latest data from Stats SA, largely due to increased transport costs linked to the Middle East war.
The Old Mutual report found that the percentage of people who are considerably financially stressed has edged up to 40% this year from 38%, driven mainly by those earning less than R30,000 a month.
Read:Younger, female, middle-income: financial stress hitting these groups hardest
Working South Africans are worrying more about debt, with the proportion rising steadily since 2024, from 43% to 50%. Once again the concern is more marked among those earning less than R30,000.
Underlying this worry is a significant increase in credit facilities held, including store cards, credit cards and personal loans.
“Loans held from mashonisas/loan sharks are also on the rise (from 12% to 19%). Furthermore, consumers have increasingly borrowed money from their circles of trust, namely family and friends, as well as from stokvels,” the Old Mutual monitor says.
About 42% of respondents acknowledged gambling frequently in the hope of winning money that can cover some of their expenses and debt, especially among those earning R8,000-R15,000.
Moreover, the number of people who find themselves in financial difficulty due to gambling has jumped to 22% from 12% last year.
To supplement income, the report also shows an increase in the number of South Africans holding down more than one job — so-called polyjobbers — to 61% from 57%, while those earning at least some money through social media has jumped to 51% from 37%.
Eight in 10 respondents earning a salary have a savings goal in place, though just 44% strongly affirm they are saving consistently, particularly among those earning above R30,000.
Just three in 10 working South Africans say retirement is their leading savings goal. Among respondents aged 50 or older, only 29% feel they have made solid progress with their retirement savings compared with 55% a year ago.
“Though consumers aspire to balance short- and long-term savings goals, actual savings behaviour remains predominantly short-term focused. Long-term financial security and retirement preparedness is suboptimal, and deteriorating among older consumers,” the report says.
A 2023/24 investments retirement reality study by 10X Investments found that only about 6% of South Africans were on track to retire comfortably, pointing to a looming crisis of more retirees who will require state grants to survive.
Business Day
