Load-shedding, political instability, and higher food prices have dropped the Momentum-Unisa Consumer Financial Vulnerability Index (CFVI) to its lowest level in 18 months, revealing a grim reality for consumer finances.
This CFVI is a tool used to measure South African households’ financial vulnerability and provide insight into the country’s overall financial health.
It is produced by Momentum as part of its Science of Success campaign and the Bureau of Market Research at Unisa.
The Momentum-Unisa CFVI for the fourth quarter of 2022 decreased from 49.7 points in the third quarter of 2022 to 47 points in the fourth quarter.
Consumer spending exceeded income in the fourth quarter of 2022, which is why the index has significantly dropped. It means that South African consumers are struggling to make ends meet.
“It’s no surprise that South Africans are struggling with financial pressures as inflation, unemployment and weakening economic growth on a local and global scale take their toll,” said Johann van Tonder, an economist and researcher at Momentum Metropolitan.
In the fourth quarter of 2022, load shedding, political instability, and corruption have posed increasingly significant threats to consumer finances.
“The political instability and corruption became more pronounced as the year progressed, and by Q4 2022, it had overtaken other high-risk factors such as rising food and fuel prices and increasing interest rates,” the Q4 2022 Momentum-Unisa CFVI report stated.
This financial vulnerability also resulted in behavioural side effects among South Africans.
The report revealed that consumers felt less hopeful and more unhappy, which led to therapeutic behaviours like “retail therapy”.
“The psychology of financial decline is one that we should all become more keenly aware of as we are forced to take a more cautious approach on our journeys to success. When expenditure exceeds income, this creates a domino effect that negatively affects saving and debt servicing abilities – aiding to general economic decline,” said Van Tonder.
The negative results from Q4 do not bode well for the first quarter of 2023, with the report revealing that 60% of key informants expect more financial deterioration for consumers, higher levels of unemployment, and a continued rise in inflation.
“The top three high-risk factors are expected to continue in 2023. However, it was found that consumers expect increased interest rates and municipal tariffs to play more dominant roles in the financial challenges ahead. One thing is for sure, consumers will remain financially vulnerable for the foreseeable future,” said Van Tonder.