South African Households – Showing Signs of Economic Recovery

After several years of punishing interest rates and high inflation, driven predominantly by higher fuel and energy prices, a recently released Pulse Study by Trans Union shows that there is increased confidence in South African household finances, despite ongoing concerns about inflation and access to credit

While the majority of the 1000 people polled in the study, indicated greater optimism in Q4 (79%), 20% reported a decline in income in the past three-month period, indicating that economic recovery has still not reached all consumers and that there may be those facing financial strain.

Credit is still a major part of the South African economic landscape with many respondents indicating they will be seeking to access new credit facilities.

Key Take-Away’s from the findings:

• 79% of South African consumers expect their income to increase in the next year, especially amongst Gen Z and Millennial groups.
• 65% of consumers expect to be able to pay their bills in full in Q4, marking an improved sentiment from a year ago, when only 59% of consumers said the same thing.
• Digital fraud remains a concern with 13% of consumers falling victim to scams, highlighting a need for increased cybersecurity awareness and protection.
• Almost all consumers considered access to credit essential for achieving financial goals, but only 38% (particularly Gen Z) felt they have sufficient access.
• Demand for credit rose slightly with 37% (led by Gen Z and Millennials) planning to seek new credit.
• Top options for new credit were: new credit cards, personal loans and ‘buy now, pay later’ services.
• 54% of respondents indicated they did not proceed with new credit applications, mainly due to the high cost of credit or finding alternative funding.

“Our findings indicate that while financial stability and optimism are growing, there’s still concern around critical themes like inflation and credit access, where consumers continue to feel the economic pressure,” said Fatgie Adams, Head of Credit Risk Solutions at TransUnion Africa.

Financial Optimism and Income Outlook on the Rise

The report shows that consumer confidence in income growth is higher than in previous quarters, with 79% of respondents expecting their income to increase in the coming year, up from 76% in Q3 2024, and from 74% in Q4 2023. Twenty percent of households reported a decrease in income in Q4, a small improvement over the previous quarter, while 42% of households said their income remained the same. Optimism about income is particularly strong among younger generations, with 86% of Gen Z and 85% of Millennials anticipating improved earnings.

South Africa’s easing inflation, down to 3.8% in September and 2,8% in October 2024 (the lowest since June 2020, and a 0.25% interest rate cut by the reserve bank in September have contributed to a growing positive outlook.

Spending and Financial Priorities Shift Toward Debt Repayment and Savings

The study highlights a trend of prioritising debt repayment and savings, particularly among younger consumers. In Q4, 65% of respondents reported being able to pay their bills in full, a six-percentage point YoY increase, with Gen Z and Millennials leading the trend at 68% and 66%, respectively. Meanwhile, 52% of consumers have cut back on discretionary spending, with Gen X (65%) and Baby Boomers (62%) the most likely to make adjustments. Reductions in digital services (26%) and cancelled memberships (30%) were among the most common cost-cutting measures.

A growing number of consumers are also focusing on building emergency savings. Thirty-six percent of Gen Z and 30% of Millennials increased their contributions to emergency funds or stokvels in Q4, with 28% of all consumers prioritising this goal. Retirement savings saw a similar increase, with 24% contributing more than in previous quarters.

“The shift toward building financial resilience is significant, especially as younger generations balance immediate debt obligations with future savings,” said Adams.

Looking Ahead: Financial Strategies for Q1 2025

In response to anticipated financial pressures, South African consumers plan to make targeted adjustments in their budgets. Top priorities include reducing discretionary spending (46%), increasing retirement savings (42%), and holding back on large purchases (41%) in the months ahead. This focus reflects a continued trend toward cautious financial management and a growing emphasis on future financial security.

“The Q4 findings demonstrate that South Africans are becoming more financially resilient and proactive, but challenges remain, particularly in areas like credit access and digital security. As we move into 2025, empowering consumers through financial literacy, secure digital tools, and accessible credit will be essential in helping them achieve financial stability and growth,” said Adams.