South Africans living paycheck to paycheck

Most South Africans appear to be living paycheck to paycheck, with less than half saying they can withstand a financial setback.

This was revealed in Sanlam’s 2024 Financial Confidence Index Report, which surveyed 1,610 South Africans, representative of the population, aged 20 to 70 years, with a personal income of at least R1,000 per month.

This year’s report revealed a nation preoccupied with present stresses, with nearly half the population having a below average – or lower – Financial Confidence Index (FCI). 

South Africa’s overall FCI remained stable with an index score of 47 out of 100, with slight improvements in financial self-determination and well-being. 

However, the survey also found that only 2 out of 5 respondents felt financially free enough to make choices they enjoy in life. 

“This could foster feelings of sadness, hopelessness, helplessness, anxiety, resentment, envy, self-loathing, etc,” said Sanlam regional executive Sipho Mncwabe.

“A lack of financial freedom could also lead to dependence on survival and making ends meet—this can be incredibly disempowering and have a knock-on effect on an individual’s self-esteem and confidence.”

The survey further found that most respondents do not feel they could withstand a financial setback, and only half feel in control of their monthly finances. 

“This all speaks to South Africa’s persistent household savings crisis, at -1.10% (Q3, 2023) – compared to Morocco, for example, at 28.3%,” said Sanlam chief marketing officer Mariska Oosthuizen.

“When people are living payday to payday, it can feel nearly impossible to save for future setbacks.”

The report revealed that South Africans earning less than R8,000 a month have lower financial confidence than individuals earning R20,000 or more.

In addition, full-time employees have a higher FCI, while unemployed individuals have a lower FCI than the general population, along with a lower financial resilience score.

South Africans with a matric or lower also have less financial confidence than the general population. 

They are also less likely to be able to handle a setback, tend to be unhappy with their current financial situation, and are concerned about future investments, which drives down their financial well-being score.

National savings

South Africa’s historically low savings rate is a significant drag on economic growth and financial stability. 

The country’s national savings rate, currently at a meager 12.7% of GDP, is low compared to its past and global peers. 

This shortfall hinders investment in crucial projects and increases reliance on foreign capital, making the economy vulnerable to external shocks.

The Reserve Bank, in its latest Quarterly Bulletin, showed that the crisis extends to individuals. 

Households’ saving rate increased marginally in the first quarter despite South Africans coming under significant pressure from the rising cost of living. 

Gross saving by the household sector as a percentage of GDP has hovered around 1.6% for the past few years, narrowing slightly since 2022.

To comfortably retire in South Africa, you need to have saved around 25 times your annual spending rate in your final year before retiring. 

This is a reality many South Africans cannot achieve, with the majority of retirees in the country unable to fully retire once at the end of their working careers. 

10X Investments Retirement Reality Report described this as a ticking time bomb, with three-quarters of respondents reporting insufficient savings.

It further found that the percentage of people retiring on their own terms has declined from 70% to 60% in just two years.

Head of product at FNB Wealth and Investments, Samukelo Zwane, said the bank’s data shows that most retirees in South Africa need to work part-time jobs to survive in retirement. 

He attributed this to poor financial planning and a lack of understanding about one’s expenses prior to retirement. 

While some costs like school fees and work-related expenses disappear, increases in medical aid, leisure activities, and unexpected expenditures like home repairs can offset these savings.

This perfect storm of low savings, rising costs, and inadequate retirement planning pose a severe challenge to South Africa’s economic and social fabric.