SA household finances slip significantly in first half of the year

Households were under pressure as the South African economy struggled to grow in the face of persistent domestic challenges. Photographer: Ayanda Ndamane, African News Agency (ANA)

Households were under pressure as the South African economy struggled to grow in the face of persistent domestic challenges. Photographer: Ayanda Ndamane, African News Agency (ANA)

Published Aug 10, 2023

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Nedbank Group, presenting its interim results for the six months ended June 30, 2023, on Tuesday, showed that South African household finances deteriorated significantly in the first half of the year.

“Growth in real personal disposable income slowed further, constrained by modest job creation and hurt by persistently high inflation. Double-digit increases in the prices of essentials and sharply higher interest rates significantly reduced income available for discretionary spending,” it said.

Households were under pressure as the South African economy struggled to grow in the face of persistent domestic challenges.

In the first quarter, the economy grew by a subdued 0.4% quarter-on-quarter (q/q), after having contracted by 1.1% in the final quarter of last year. The increase in the first quarter of 2023 mainly reflected the impact of the previous quarter’s low base, rather than any underlying upward traction, Nedbank said.

The bank compared its average client income and expenditure from January to May 2023 to the comparative period in 2022. It found that while income in the period was up 4% from the prior year, expenditure had increased.

Looking at loan repayments, home loans were up 18%, vehicle finance up 10%, while personal loans rose 4%. Essential expenditure on groceries rose 16%, education was up 8%, health care was up 7%, while fuel was unchanged.

Discretionary expend was under pressure. Money spent on home improvement was down 7%, clothing down 2% and alcohol slipped 2%. Fast food was the only discretionary expenditure that rose, up 4%.

The lender said although household debt burdens rose only moderately, edging up to 62.1% of disposable income in the first quarter, the cumulative 475 basis point increase in interest rates since 2021 pushed debt service costs to 8.4% of disposable income from a 16-year low of 6.7% in the final quarter of 2021.

As a result, households increasingly relied on savings to sustain living standards, depleting the buffers built up during the pandemic. The personal savings rate stood at -0.2% in the first quarter from a peak of 1.5% in the third quarter of 2020.

Against this background, household demand for credit weakened and commercial banks tightened lending criteria. Growth in household loans and advances slowed to 6.7% year- on-year in May 2023, after having accelerated throughout last year to reach a high of 7.9% in January 2023, Nedbank said.

Growth in mortgages, vehicle finance and personal loans softened, while demand for transactional credit remained relatively firm.

What is the average salary?

According to Statistics SA quarterly employment survey (QES) for the first quarter of the year ending March 2023, the average salary in South Africa is now R25 304 a month.

However, the average nominal take-home pay, tracked in the BankservAfrica Take-home Pay Index in June, showed that the average nominal take-home pay was R14 596.

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