Rising inflation and interest rates
At the start of Q2, the South African annual inflation rate was at 5.9%, consistent with levels observed in prior months and aligned with market forecasts. However, this is the 12th consecutive month where annual inflation has been higher than the median of the South African Reserve Bank’s (SARB) target range of 3%–6%. The continued high inflationary pressure resulted in SARB hiking the repo rate by 50 basis points (effective 20 May 2022) to 4.75%, which marks the most significant increase since 2016. A repo rate hike also increases a bank’s prime lending rate (from 7.75% to 8.25%). For borrowers, this means higher monthly repayments on their debt obligations.1
Household income and expenses
More households (31%) experienced increased income levels than those that registered a decrease (26%) in Q2 2022. The positive shift in household income levels is mainly due to the decline (down 0.8%) in the unemployment rate for Q1 2022 at 34.5%. The remaining 43% of households experienced no change in their income levels. However, respondents were optimistic and expected household income levels to continue trending upward. Despite the improvement in household income levels, consumers remained focused on cutting back discretionary expenses, primarily due to the continued inflationary pressure and rising interest rates.
Majority of South African consumers believed access to credit is essential
Most consumers (93%) surveyed indicated they believed access to credit is important. A sentiment shared across Gen Z (97%), Millennial (94%) and Gen X (95%) consumers. However, less than half (42%) of these consumers believed they had sufficient access to credit. Despite the lack of access 60% of consumers indicated they do not intend to apply for new credit or refinance existing credit at this point in time.
Alternative Source: Oxford Economics