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March 09, 2010
SA finds spending hard habit to quit
Michael Bleby
Business Day
Spending is a hard habit to break. South Africans, stung by recession and high debt, want to cut spending and save, but are finding it hard to do, a survey shows. At first glance, the figures from the latest MasterCard worldwide purchasing priorities index are confusing. The proportion of consumers pledging to save more over the first half of this year actually slipped, to 42% of respondents from 47% six months ago. The number planning to save less fell, to 23% from 29%. The number saying they would save the same jumped to 36% from 24%. At the same time, uncertainty about economic prospects has soared.
Up to 83% of people who said they would save more or the same said they were planning to do so because of greater uncertainty.
This is up from 75% six months ago, and from 51% a year ago.
The eight-year boom that ended in November 2007 — the longest in postwar SA’s history — gave people a sense of security of ever-increasing wealth that was shattered by the recent recession. It also left consumers with only a little buffer to see them through the difficult times.
On a national basis, saving as a proportion of household income has declined every year since 2006 — rather than saving, South Africans have been consuming, and often borrowing to do so.
“We’ve gone through so many years prior to the crisis in which we almost assumed … we will always have higher growth and more income creation. That was part of why people didn’t save. Now, after the crisis they realise the importance of saving,” BJM group economist Elna Moolman said yesterday.
There are signs that South Africans are trying to save more. The proportion of respondents who said they would save up to 20% of their income over the next 12 months stood at 68%, down slightly from 69% six months ago, but still well up on the 61% of a year ago.
The nation’s would-be savers are perhaps becoming more realistic about how much they can set aside. The proportion of people saying they will save between 20% and 50% of their income slipped to 15% from 17% six months ago. A year ago it was 19,5%. But they are slowly unwinding their debt positions. SA’s household debt-to-income ratio slipped from its record 83,4% in the first quarter of 2008 to 79% in the third quarter of last year.
Perceptions play a role in how people see saving. The biggest barrier people cited was insufficient income. This stood at 71%, down from 81% six months earlier.
The second-most-cited reason for not saving was high inflation, which at 32% was little changed from the 31% of half a year ago.
The third reason — low return — was cited by 15% of respondents, down from 24%.
Reversing the South African trend of net consumption, rather than saving, is going to be a long-term project.
“Longer term, (consumers) intend to increase savings, but in the short term there is a lot of pressure on incomes. They’re not able to right now,” Moolman said.
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