Johannesburg - South Africans are feeling the financial pinch after yet another bruising rates increase, and monthly spend items such as gym memberships, DStv subscriptions and household contents insurance are getting the chop.
Consumers are also spending considerably less on alcohol, meat and snacks, as the food basket also taken an increase recently.
The South African Reserve Bank announced in May that it was increasing the repo rate by 50 basis points, taking the repo rate to 8.25% and the prime rate to 11.75% – now higher than pre-Covid levels of 2020.
The rates increase have been bruising for South Africans, especially those who owe the banks for home and car loans.
It was the 10th interest rate hike in a row, since a 25 basis points increase in November 2021.
IOL PROPERTY has reported that a homeowner with a R2 million bond would have been required to pay at least R15 808 in November 2021, but in May 2023, this has rocketed to R21 674.
This increase represents a R5 866 monthly increase in the space of less than two years, in an environment of below CPI annual increases in wages.
TrendER/infoQuest, an online market research company specialising in uncovering insights through online quantitative and qualitative research, conducted a snap survey in May 2023 among 300 respondents.
They asked 300 people in South Africa what subscription services, policies or contracts they had cancelled in the past six months.
The data showed that 25% of those surveyed had cancelled their gym memberships, while 18% had cancelled their DStv subscription.
This was followed by 10% of respondents, who said they had stopped paying for household contents insurance.
– Gym memberships - 25%
– DStv - 18%
– Household contents insurance - 10%
– Funeral policy - 9%
– Medical aid - 9%
The survey said younger people under 35 were more likely to cancel household insurance, medical aid and funeral policies.
TrendER/infoQuest said there was no significant difference in cancellation rates across the income categories.
TrendEr/infoQuest operations director Claire Heckrath said the tough economic conditions were driving consumers to cancel.
“Unfortunately, the tough economic conditions are resulting in some consumers cancelling their precautionary savings products such as insurance, medical aid and funeral policies.
“While it may be tempting to cancel personal insurance policies to save money, it is important to recognise the potential risks and consequences.
“It is crucial to carefully evaluate the potential risks, consult with professionals and make informed decisions based on individual circumstances,” said Heckrath.
Another TrendER/infoQuest survey, also among 300 people, said one in two South Africans had cut back in buying snacks, biscuits, sweets and desserts, with alcoholic beverages and meat/chicken/fish in second and third positions.
Fruits and vegetables, as well as stable products such as rice and pasta, were the least affected, while lower-earning consumers had cut back in their spending on meat, chicken, fish and dairy products.
Mogorosi Mashilo, the managing director of TrendER/infoQuest, said the data was clearly showing South Africa was feeling the pinch.
“Regardless of age and income, South African consumers are certainly feeling the financial pinch when it comes to feeding themselves and their families, with some significant spending shifts in various grocery categories,” said Mashilo.
The research also found that energy instability due to load shedding and power outages was also contributing to the declining spending patterns.
They found that 75% of those surveyed were buying fewer groceries to reduce the risk of food wastage.