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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 percent of respondents from 47 percent six months ago. The number planning to save less fell to 23 percent from 29 percent.
The number saying they would save the same jumped to 36 percent from 24 percent. At the same time uncertainty about economic prospects has soared. Up to 83 percent 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 percent six months ago and from 51 percent a year ago.
The eight-year boom that ended in November 2007 ? the longest in post-war 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 percent of their income over the next 12 months stood at 68 percent, down slightly from 69 percent six months ago, but still well up on the 61 percent 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 percent and 50 percent of their income slipped to 15 percent from 17 percent six months ago. A year ago it was 19.5 percent. But they are slowly unwinding their debt positions. SA's household debt-to-income ratio slipped from its record 83.4 percent in the first quarter of 2008 to 79 percent 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 percent, down from 81 percent six months earlier.
The second-most-cited reason for not saving was high inflation, which at 32 percent was little changed from the 31 percent of half a year ago.
The third reason ? low return ? was cited by 15 percent of respondents, down from 24 percent.
Reversing the South African trend of net consumption, rather than saving, is going to be a long term project.
In the 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.
Source: Business Day
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